Morgan Stanley downgraded Education Management (EDMC) Friday following company caution that earnings and enrollments could slide in the coming quarter and fiscal year.
Shares of Education Management were volatile, moving from red to green. Last check was down 7 cents, or 0.35%, to $19.83. Barclays reiterated its Overweight rating and $22 price target Friday morning.
On Thursday, the Pittsburgh-based parent of four education systems revealed that earnings for its first quarter, ended in September, were 3 cents better than expected at 24 cents per share, before non-recurring items.
But for the December quarter and fiscal 2012, the company suggested earnings will come in between 45 cents and 47 cents per share, well below the 56 cents analyst consensus. For the fiscal year, the range is now $1.34 to $1.40, excluding non-recurring items, compared to the $1.51 consensus. The lower guidance partially reflects lower new student enrollment and more dropped students from Argosy University Online as it moves “to a non-term academic calendar.”
In mid-October, Hedge fund manager Jim Chanos decried the industry at a value investing confab in New York as a predatory business producing worthless degrees and too much debt. He singled out ITT Educational Services (ESI), whose shares were down less than 1% to $44.28 Friday morning.
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