Apollo Group Shares Sink On Margin Warning

NEW YORK (AP) — Shares of Apollo Group Inc. dropped 16 percent Wednesday, as the company's warnings on profit margins overwhelmed higher than expected earnings.

After the market closed Tuesday, the company which runs the University of Phoenix campuses nationwide said it earned $125.3 million, or 77 cents per share, on revenue of $876.1 million for its second fiscal quarter.

Analysts polled by Thomson Reuters had expected a profit of 65 cents per share on revenue of $865.5 million.

But the company also warned that bad debt expenses would increase, said Robert W. Baird analyst Amy Junker. She downgraded Apollo to "Neutral" from "Outperform" and cut her price target on the stock to $85 from $100.

Phoenix-based Apollo said that new student enrollment was up 23 percent in the fiscal second quarter from last year.

But that was down from first-quarter growth of 25.6 percent, and ended three straight quarters of accelerating year-over-year growth, BMO Capital Markets analyst Jeffrey Silber said.