ITT Education shares tumble again on weak outlook

Shares of ITT Education continue roller-coaster ride, tumble again on weak earnings, outlook

Associated Press

NEW YORK (AP) -- Shares of ITT Educational Services Inc. continued a roller-coaster ride Friday, tumbling again a day after announcing a surprise fourth-quarter loss and offering a weak outlook for 2013.

THE SPARK: ITT lost $9.5 million, or 41 cents per share, in the final quarter of 2012. Revenue fell 18 percent to $300.8 million from $368.3 million. Analysts surveyed by FactSet expected a profit of $1.85 per share and revenue of $313.6 million.

The company forecast 2013 earnings per share of $3.50 to $4, well below the analysts' consensus estimate of $4.53 per share.

THE BIG PICTURE: Carmel, Ind.-based ITT offers technology-oriented undergraduate and graduate degree programs at more than 140 locations in 39 states and online.

Like other for-profit education companies, it's been shaken by tougher government oversight. Enrollments soared during the recession, but have shrunk in recent years as the Obama administration put in place new, stricter regulations on recruitment and marketing.

After announcing the quarterly results and dim outlook, the company's shares plummeted to a more than 10-year low, but then, surprisingly, rebounded to end Thursday up 18 percent at $16.36.

THE ANALYSIS: Citi analyst James Samford backed his "Sell" rating for ITT, saying he thinks the company hasn't set aside enough cash to cover the roughly $600 million in private loan guarantee arrangements it has entered into, noting that the loans have a default rate of 60 percent.

Samford said the initial plunge in the stock price after the quarterly results were announced seemed like the right reaction to him, rather than the rebound that followed.

"We recommend holders of ITT stock take advantage of what we view as an unwarranted positive stock move and sell shares of ITT," Samford wrote in a note to investors.

THE SHARES: Down 32 cents, or 2 percent, to $16.54 in Friday afternoon trading, after falling to $15.15 earlier in the session. Over the past 52 weeks, the stock has traded between $11.69 and $77.

Over the past year, the shares have lost about 76 percent of their value.