Shares of ITT Educational Services rise as enrollments, profit jump, guidance tops estimates

Shares of for-profit educator ITT up on strong 4Q

NEW YORK — Shares of for-profit education company ITT Educational Services jumped Thursday on the strength of its guidance for next year and growth in enrollments and profit in the fourth quarter

The Carmel, Ind., company said its earnings grew 49 percent to $93.7 million. For the year, it earned $300.3 million, or $7.92 per share — and expects to earn between $10 to $10.50 per share in 2010.

Analysts polled by Thomson Reuters expect a profit of $9.48 per share for 2010, on average.

Shares rose $7.74, or 7.9 percent, to $105.65 in afternoon trading, running counter to broader markets. The Dow Jones industrials sank 2 percent.

ITT, which runs technology-oriented schools, said fourth-quarter enrollments rose 30 percent to 80,766 students as unemployment remained high.

Enrollments at for-profit schools have jumped during the recession as the jobless and underemployed try to bulk up their resumes.

Analyst Amy Junker of Robert Baird said she expects enrollments to continue to grow even as the economy recovers as the wage gap between those with a postsecondary degree and those with only a high school diploma continues to grow. The company’s ITT Technical Institute has “strong brand recognition,” she said, leaving it well-positioned to continue to grow.

ITT is also increasing its bachelor’s degree programs, which Junker said could result in higher operating margins. In the last quarter, ITT’s operating margin grew to 40.8 percent from 36.4 percent a year earlier.

Stocks of the for-profit sector overall have been under pressure since early 2009 because of the Education Department’s focus on recruitment practices and benefit to students under the Obama administration. The government is revamping its regulation of the schools, and some analysts fear possible changes in compensation for recruitment counselors and other issues may hit enrollment and profits.

Apollo Group Inc., owner of the University of Phoenix, the largest for-profit school, is also the subject of a probe by the Securities and Exchange Commission on its revenue recognition practices, which are not unique in the industry. Its stock added 2.5 percent in afternoon trading.