Sector Snap: For-profit Education Providers Sink

NEW YORK (AP) — Shares of for-profit education companies tumbled Wednesday a day after Apollo Group Inc., one of the largest and oldest of the companies, said the Securities and Exchange Commission had launched an "informal inquiry" into its revenue accounting practices, its second SEC probe this year.

"We are confident that the SEC's accounting issue is specific to (Apollo)," wrote RBC Capital Markets analyst Robert Wetenhall in a note to investors Wednesday. DeVry Inc., another of the more-established higher education providers, said on its Tuesday evening earnings conference call that it had not been contacted by the SEC and was not concerned. But the rest of the sector will likely be under pressure "until the dust settles."

Morgan Stanley and RBC's Wetenhall both downgraded Apollo on Wednesday. Meanwhile, Oppenheimer & Co. upgraded DeVry to "Outperform" from "Perform" after its strong earnings report Tuesday.

DeVry shares rose $2.37, or 4.3 percent, to $57.25 in afternoon trading, bucking the general sector trend.

Apollo shares tumbled $12.64, or 17 percent, to $60.33.

SEC inquiries often end without finding harm done by the company. Still, the probe comes at a time when the Department of Education is keeping an eye on the sector at large. In a Congressional hearing earlier this month, Mary Mitchelson, an inspector general of the Education Department, described investigations of different schools' attendance-tracking and financial aid practices. She said the government would continue to pursue cases of "diploma mills" and eligibility exams.