Citi Comments On Apollo Group's Earnings Results

Apollo Group's APOL Q1 Rev/EPS of $1.33B/$1.61 were above the Street at $1.26B/$1.40 and CIRA at $1.29B/$1.50, on better than expected persistence, lower bad debt, and cost cutting efforts. Q2 Outlook for another 40%+ Y/Y decline in new starts and still no resolution on gainful employment means visibility remains extremely low. YoY revenue growth decelerated to 5% YoY in F1Q11 down from 18% YoY in F4Q10. APOL pointed to cost cutting efforts in admissions, and better collections as positives in Q1. Management was also pleased with the rollout of its University Orientation program, a free 3-week introductory course for new students with low credits. While the company continues to withhold formal guidance, APOL noted that it faced at least another quarter of New Enrollment declines similar to Q1. Total enrollment and revenue declines have yet to trough as well, as the flow through from the weak new enrollment begins to impact top-line more substantially. Citi lowers its PT to $45 and maintains its Hold rating on APOL APOL closed Monday at $38.10