Sector Snap: Education companies shares fall

Education stocks fall after Apollo discloses University of Phoenix accreditation concerns

Associated Press

NEW YORK (AP) -- Shares of for-profit education companies fell Tuesday after Apollo Group Inc., which owns the University of Phoenix, said the college's accreditation may be put on probation.

Apollo said its accrediting body determined that the University of Phoenix doesn't have enough autonomy from Apollo itself. It may place the university on probation because of those problems, although Apollo says it plans to appeal the recommendation. The school's status won't change until the review and appeals are complete, which may take until the end of June.

Accreditation is necessary for the company to continue to be eligible for student loans, which make up much of its revenue.

Apollo's Western International University was also found to be out of compliance with criteria related to its autonomy, financial stability, and student learning assessment. The accrediting body recommended that that school be placed on probation as well, and Apollo plans to appeal.

Shares of Apollo were already trading at their lowest prices in more than a decade, and in afternoon trading the stock fell $1, or 5.6 percent, to $16.83. That is its lowest price since October 2000.

Elsewhere, shares of DeVry Inc. gave up 72 cents, or 2.4 percent, to $29.89, and shares of Career Education Corp. slipped 5 cents to $3.67. Strayer Education Inc. fell 83 cents to $49.10.

William Blair analyst Brandon Dobell said he believes the accrediting committee's recommendation will be upheld and the University of Phoenix's will be on probation until the fall of 2014. However he said it is "extremely unlikely" Phoenix will lose its accreditation and access to federal student loans.

"We fully expect the issues to be resolved and probation to be lifted and do not view the issue as particularly relevant to the academic quality of the institution," Dobell wrote.

In afternoon trading, shares of American Public Education Inc. lost 76 cents, or 2 percent, to $38.01. ITT Educational Services Inc. sank by 92 cents, or 5.9 percent, to $14.62 and Grand Canyon Education Inc. fell $1.07, or 4.3 percent, to $23.69.

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