Updated from Oct. 26

Shares of

Career Education

(CECO) - Get Report

surged Wednesday as a 60% rise in third-quarter earnings helped ease concerns about the company's legal entanglements.

The stock was recently up $2.56, or 9.2%, to $30.50 on Instinet.

The Hoffman Estates, Ill., college operator earned $43.0 million, or 41 cents a share, in the three months to Sept. 30, compared with earnings of $26.9 million, or 26 cents a share, last year. Revenue rose 39% from a year ago to $438.5 million.

The latest quarter included a charge of 2 cents a share to cover legal fees, before which analysts surveyed by Thompson First Call had been forecasting earnings of 39 cents a share on revenue of $424.96 million in the 2004 quarter. The company cited a 24% rise in same-school population and a 7% increase in average revenue per student for the strong third-quarter results.

The company forecast fourth-quarter earnings of 66 cents a share on revenue of $470 million to $475 million, compared with the Thomson First Call estimate of 64 cents a share on revenue of $471 million. The estimate factors in higher costs related to legal and regulatory matters.

Also on Tuesday, Career Education said it hired a forensic accountant to assist a special committee of its board that is investigating allegations of securities fraud. The company has been accused of doctoring enrollment reports in a class-action lawsuit filed by former employees. The

Financial Times

reported in August that a separate probe was under way by the Justice Department.

"The ongoing review may have an impact on the company's reported financial statements," Career Education said. "The special committee's investigation is ongoing."