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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowShares of ITT Educational Services Inc. rose the most in a year Thursday after the for-profit educator reported a fourth-quarter profit that beat analysts’ estimates.
ITT shares jumped 8.5 percent to $68.10 at 11:15 a.m. and earlier reached $70, in the biggest intra-day gain since January 2010.
Early Thursday, the Carmel-based company said new-student enrollment fell for the second straight quarter, but it still turned a profit.
The company saw 9.4 percent fewer students sign up the three months ended Dec. 31 compared with the same period a year ago. In the third-quarter, ITT’s new-student enrollment fell 3.9 percent—the first decline the company had experienced since the recession began.
ITT’s profit for the quarter grew 4 percent to $97.5 million, compared with the fourth quarter a year earlier. Profit per share was $3.14, topping expectations of Wall Street analysts, which averaged $3.10 per share, according to a survey by Thomson Reuters.
Revenue for the quarter grew 9.5 percent to $410.1 million, also exceeding analysts’ estimates.
For all of 2010, ITT Educational grew profit by nearly 25 percent over the previous year to $374.2 million. Revenue surged 21 percent to nearly $1.6 billion.
Enrollment is declining at for-profit colleges after the U.S. Education Department increased restrictions on recruiting and U.S. Senate hearings featured testimony that students are lured into programs that leave them with federal loans they can’t repay. President Barack Obama’s administration is also proposing to restrict taxpayer funding to for-profit colleges, which rely on federal aid for as much as 90 percent of their revenue.
“There is a fundamental shift in consumer behavior,” Ariel Sokol, an analyst with New York-based UBS Investment Research, told Bloomberg News in a telephone interview. “Consumers in the past were concerned about getting funding. Now, they’re starting to ask the right questions: Is it worth it to take on this level of debt? Are their better alternatives? What’s their return on investment?”
Beginning this year, the Obama administration will require for-profit colleges to ensure that at least 45 percent of former students are paying down their loans four years after leaving school.
If schools’ former students fail to achieve that threshold, the government would not allow a for-profit education program to get student-loan funding to raise its enrollment levels. And if repayment rates fall below 35 percent, the government would cut off student-loan funding entirely for any new students.
The Department of Education believes the repayment rates are an indication of whether students at for-profit schools graduate at all and whether the degrees they earn lead to “gainful employment.”
According to data released by the government in August, ITT’s repayment rate is just 31 percent.
Bloomberg News contributed to this report.
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