Why ITT Educational Services Shares Jumped

Why ITT Educational Services Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of ITT Educational Services were looking smarter today, gaining as much as 16% after an impressive third-quarter earnings report.

So what: The for-profit educator said earnings per share came in at $0.80, much better than estimates at $0.55, though that was down from $1.83 a year ago. Revenues also dropped 17.6% to $259.4 million, but that was still better than the consensus at $251.9 million. Management did not provide commentary in the earnings release, but there was one bright spot despite the drop in profits and sales. New student enrollment, a key industry figure, increased 5.2% in the quarter, indicating that the company may be reversing its recent enrollment decline. Overall enrollment still drove 7.1%, driving down income.

Now what: In addition to the earnings beat, ITT bumped up its full-year EPS guidance to $4.00-$4.20 from $3.50-$4.00, above analyst estimates at $3.86. As we saw yesterday from Apollo Group, whose shares also rallied after a strong earnings beat, the for-profit education industry seems to be bottoming out. With continuing pressure from state and federal governments on the industry's practices, I wouldn't expect the industry to reach its former heights, but there may be some short-term upside in the sector.

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