Shares of Apollo Education Group, Inc. APOL rose more than 2% in afterhours trading on Jul 7 as the post-secondary education company announced strong third-quarter fiscal 2016 results.

Apollo Education Group signed an agreement to be acquired by a consortium of investors for about $1.1 billion in Feb 2016. If the deal gets all the necessary approvals, the transaction is expected to close in Aug 2016.

Apollo Education’s adjusted earnings (excluding special items) of 37 cents per share in the third quarter of fiscal 2016 surpassed the Zacks Consensus Estimate of 28 cents by 32.14%. The bottom line declined 32.7% year over year from 55 cents due to lower revenues.

APOLLO GROUP Price, Consensus and EPS Surprise

APOLLO GROUP Price, Consensus and EPS Surprise | APOLLO GROUP Quote

Third quarter 2016 net revenue of $558.0 million surpassed the Zacks Consensus Estimate of $543 million by 2.82%. Revenues however declined 17.5% from the prior-year quarter due to lower enrollments.

Adjusted EBITDA was $90.7 million during the quarter, down from $132.2 million in the prior year quarter.

Segment Details

University of Phoenix (UOP) revenues declined 24.3% year over year to $424.5 million due to a 24.8% decline in total enrollment to 155,600. New enrollment, or starts, at UOP declined 39.1% year over year to 17,900.

UOP’s enrollments have been sluggish for several quarters now due to regulatory challenges, and changes and competition in the higher education industry. The company adopted a transformation strategy for UOP to turn it into a “smaller, but better performing” university. However, some of its efforts hurt enrollment in the quarter.

Apollo Global reported net revenue of $125.0 million, up 14.1% year over year.  Apollo Global continues to expand in international markets, thereby providing top line support.

Other Schools reported revenues of $8.5 million in the third quarter of fiscal 2016, up 41.7% year over year.

Outlook   

Due to the upcoming merger, Apollo Education Group did not provide any update on its guidance.

Apollo Education Group carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the education industry include American Public Education, Inc. APEI, DeVry Education Group Inc. DV and Grand Canyon Education, Inc. LOPE. All the three companies hold a Zacks Rank #2 (Buy).  

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