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Apollo Group to open higher as fall in new enrolments slows

Wednesday, 23 Oct 2013 | 7:50 AM ET

Oct 23 (Reuters) - Shares of University of Phoenix owner Apollo Group Inc looked set to open 17 percent higher after the company reported that falls in new enrolments are finally starting to slow.

The biggest U.S. for-profit college also said cost cutting had helped boost quarterly profit, which was more than twice what analysts expected.

"We are positively surprised at the level of expected costs cuts in fiscal 2014 after 2013," Deutsche Bank analyst Paul Ginocchio wrote in a note to clients.

Apollo said it expected to save at least $300 million in costs in its fiscal year ending August 2014.

The company, which said on Tuesday that it was changing its name to Apollo Education Group, reduced expenses by $350 million in 2013.

"Our key concern is the impact on new enrolment as marketing spend is reduced, something we have not really seen so far beyond the quarter just reported," Ginocchio said.

The U.S. for-profit education industry has struggled to attract students after the government made admission rules stricter to avoid high student debt-loads and low graduations rates.

Apollo said new enrolments fell by 22 percent in the fourth quarter, a decline narrower than the 24 percent reported in the third quarter.

The company reported earnings of 55 cents per share from continuing operations, excluding items, for the fourth quarter ended Aug. 31. Analysts on average had expected 25 cents per share, according to Thomson Reuters I/B/E/S.

Apollo's stock was up at $24.50 in premarket trading on Wednesday. The share has gained only 4 percent in the past 12 months to Tuesday close and underperformed the S&P 500 index.

(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Kirti Pandey)

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