Santa Ana-based vocational school operator Corinthian Colleges Inc., which is wrestling with the threat of potentially crippling regulation, warned of a big profit shortfall and drop in student enrollment for the current quarter.
Corinthian, which runs more than 100 campuses in the U.S. and Canada that offer degrees in healthcare, criminal justice and other areas, projected a profit of $17.4 million to $20 million for the three months through December.
That would be down by more than half from a year earlier and well below the $30 million in profits Wall Street analysts had been expecting on average.
Corinthian also warned of a 15% to 17% adjusted drop in enrollment at its schools as the company stops enrolling riskier students.
The company and others are under fire for students who took on more debt than they could afford and for defaults on federally backed student loans.
In September, Corinthian said it stopped enrolling ability-to-benefit students, or those without high school diplomas, at two of its schools.
Ability-to-benefit students tend to see higher rates of default on student loans, according to Corinthian.
The move is designed to help the schools meet federal rules covering cohort default rates, which include students who aren’t able to start paying off loans six months after graduating.
Corinthian projected revenue of $470 million to $480 million for the three months through December. That would be up about 15% from a year earlier but below the $481 million analysts had been expecting.
The forecast came on the heels of Corinthian’s results for the three months through September.
The company reported a profit of $33 million, about even with a year earlier and shy of the $33.9 million Wall Street expected.
Revenue was $501.7 million, up 29% from a year earlier and topping the $494.1 million expected by analysts.
Federal regulators have proposed a dozen or so rules that would limit how Corinthian and other school operators recruit students.
The rules potentially could cut off federally backed loans to school operators.
Corinthian gets the bulk of its revenue from students with federal loans. The company’s student repayment rates are among the lowest in the industry.
The rules are set to take effect in 2011 and 2012.
