Shares of for-profit education companies slipped Friday after American Public Education Inc. slashed its third-quarter outlook and said its guidance for the full year shouldn’t be relied upon, as increased operations activity in the U.S. military is hurting its net course registrations.
The unexpected guidance cut stoked worries surrounding the troubled sector, which is under government scrutiny for fraud and deceptive marketing practices. The U.S. Department of Education also has proposed new regulations tightening recruiter payment rules and last week recommended schools be penalized for graduating students with heavy debt loads, among other moves to ensure students are benefiting at the institutions.
In recent trading, shares of American Public, the parent of online-only schools American Military University and American Public University, were off 28% to $30.54 on heavy volume. Fellow education companies DeVry Inc., Career Education Corp. and Strayer Education Inc. also fell in sympathy. DeVry was off 5.4% to $48.21, while Career Education and Strayer lost 5.7% to $20.66 and 3.8% to $211.84, respectively.
American Public said the enrollment shift began in mid-June as military operations grew in Afghanistan and the Pacific. Almost two-thirds of its student body came from the military in the second quarter.
“The sudden decline in military course enrollments adds considerable uncertainty as to when or if this market will return,” BMO Capital Markets analyst Jeff Silber said in a note.
And ThinkEquity’s James Maher called the news the latest setback in what has been a rough year for for-profit education companies, as there’s still a lot of uncertainty about the increased government regulations.
Late Thursday, American Public lowered its estimates for third-quarter net-course registrations, looking for growth of 20 percent to 22 percent, down from 29 percent to 31 percent. It also sharply cut its earnings view to 5 percent to 10 percent growth from 56 percent to 58 percent and its revenue growth outlook to 29 percent to 31 percent from 40 percent to 42 percent.
