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TheStreet Open House

Apollo (APOL) Income Drops 61%, Yet Shares Surge

NEW YORK (TheStreet) -- Apollo Group (APOL), the for-profit parent company of University of Phoenix, surged in trading after reporting fourth-quarter diluted earnings per share of 19 cents on revenue 15.2% lower than a year earlier to $845 million. Operating income dropped 61.3% to $34.7 million from $89.6 million a year earlier.

Excluding special items such as restructuring, the company earned 55 cents a share, 30 cents higher than estimates provided by analysts surveyed by Yahoo! Finance.

Shares are up 25.3% to $26.24, leading the S&P 500 which is down 0.48%.

Waning enrollments continued to bedevil Apollo's profitability, with fourth-quarter degreed enrollments to University of Phoenix dropping 18.1% to 269,000 students. New degreed enrollments fell 22.3% to 41,000.

For full-year 2013, the Phoenix-based company recorded net revenue of $3.7 billion, 14% lower than $3.7 billion in 2012, and a 36.8% drop in operating income to $4247.4 million.

"Fiscal Year 2013 brought challenges and opportunities for Apollo Group," said CEO Greg Cappelli. "We set out this year this year to differentiate University of Phoenix, diversify Apollo Group and build a more efficient organization. We have made meaningful progress in each of these areas."

For the upcoming 2014 fiscal year, Apollo forecasts operating income between $375 million to $450 million on revenue of $2.95 billion to $3.05 billion. The figures well-surpassed the expectations of analysts surveyed by Thomson Reuters, who predicted operating income of $386 million on $3.21 billion on revenue.

The company also announced it is making 500 non-faculty employees redundant this week so as to put the company in good stead for an improved 2014.

Apollo owns four tertiary institutions, University of Phoenix the most well-known, and numerous other high-school and trade-based programs and organizations. The company plans to change its name to Apollo Education Group effective mid-November to better reflect operations.

TheStreet Ratings team rates Apollo Group as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate Apollo Group (APOL) a HOLD. The primary factors that have impacted our rating are mixed --some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and a generally disappointing performance in the stock itself."

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