Corinthian Outlook Falls Short, Shares TumbleTuesday, August 23, 2011
Shares of Santa Ana-based Corinthian Colleges Inc. fell after the vocational school operator warned investors of a loss and lower than expected revenue for the current quarter.
Shares were down as much as 16% in New York midday trading. The stock closed down 7% Tuesday. The company had a recent market value of $165 million.
Corinthian runs more than 100 campuses in the U.S. and Canada offering degrees in healthcare, information technology, criminal justice and other areas.
Corinthian’s projected loss for the three months through September of $1.7 million to $3.4 million fell short of the $12.7 million profit Wall Street analysts had expected.
Corinthian also missed analyst expectations on revenue of $427 million for the current quarter.
The company said it expects revenue for the quarter to be between $414 million and $424 million.
The outlook follows a disappointing recently ended quarter for Corinthian during which it saw profits fall nearly 90% from a year earlier to $3.4 million.
The company cited a 27% drop in new student enrollment during the recently ended quarter along with an impairment charge of about $12 million from the sale of student loans and severance for the profit shortfall.
In June Corinthian exited the student loans business, selling its loan portfolio to ASFG LLC.
The steep enrollment decline is partially attributed to more stringent admission standards being enforced by Corinthian.
The company recently began enrolling ability-to-benefit students, or those without a high school diploma, once again. Corinthian had stopped enrolling students without a high school diploma earlier this year in response to pending federal regulations.
Corinthian and other for-profit school operators have been criticized in recent years for what federal regulators have called predatory recruiting practices and high student loan default rates.
The Education Department issued final rules in June that seek to hold school operators more accountable for loan defaults through stricter lending and loan repayment requirements.
The new rules, which school operators have until 2015 to meet, were not as harsh as originally feared.
Most of Corinthian's diploma programs are expected to meet the new requirements.
The company's two-year associate degree programs are set to see changes to pricing and program curriculums in an effort to address the new rules.