ITT shares surge again after another profit surprise

Shares of ITT Educational Services Inc. shot up by as much as 60 percent Friday morning after the Carmel-based company reported that its first-quarter profit had nearly tripled from last year.

It’s the second time in as many weeks that ITT Educational has surprised Wall Street with strong profits, causing investors to bid up its shares.

After closing at $4.15 apiece on Thursday, ITT Educational’s stock price rose as high as $6.62 in morning trading Friday, before dropping back to $5.27.

The Carmel-based operator of for-profit colleges earned $10.4 million during the three quarters ended March 31, a 188-percent increase over the same quarter a year ago. Those profits amounted to 44 cents per share, compared with 15 cents per share a year ago.

The two Wall Street analysts that made predictions about ITT Educational’s first-quarter results were expecting earnings per share of 4 cents or 9 cents, according to a survey by Thomson Reuters.

Revenue fell 3 percent in the quarter, compared with a year ago, to $230 million. Revenue was pulled down by a 10.4-percent decline in overall enrollment over the past 12 months. New student enrollments have fallen even faster, by 15.8 percent, as ITT faced two lawsuits from the Obama administration and made a misstep last spring with its advertising.

But ITT’s revenue was helped by fewer unpaid loans. It reported that bad debt as a percentage of revenue fell to 5.3 percent from an alarming 7 percent a year ago.

On May 29, ITT Educational finally reported its 2014 financial results after a long delay due to a ruling last year by the U.S. Securities & Exchange Commission that the company had to include a series of private loans for its students onto its balance sheet.

The company earned $29.3 million last year, reversing a $27 million loss it sustained in 2013. Earnings per share last year were $1.23, compared with an average prediction of 36 cents per share, according to three stock analysts surveyed by Thomson Reuters.

That announcement sent ITT Educational’s share price up that day by 81 percent.

Also last month, ITT was sued by the SEC for allegedly deceiving both investors and its auditor about the extent of losses ITT was suffering after private student-loan programs it created in the wake of the 2008 financial crisis froze up traditional sources of private student loans.

ITT struck a deal with new lenders that put the company at risk if defaults spiked, which they did. At the end of the first quarter, the balance of those two loan programs stood at $179.4 million.

ITT officials have called the SEC suit meritless and said they look forward to defending themselves in court.