BANGALORE (Reuters) ? The Washington Post Co continues to grapple with declining student enrollments at its core Kaplan education business and it signaled a further fall in the division's profit over the rest of the year.
The company, which posted better-than-expected earnings from operations on cost cuts, has been restructuring its Kaplan education unit to combat a prolonged fall in the number of students signing up for its courses and will see this trend continue going forward.
"I don't think they will generate any profit on Kaplan Higher Education as we get into the fourth quarter and 2012," PAA Research analyst Bradley Safalow told Reuters.
Most for-profit colleges have seen a drop in new students as they change their enrollment practices to comply with tougher new regulations linking access to federal aid with students' ability to repay debt.
Earlier this week, for-profit education companies Lincoln Educational Services Corp, Bridgepoint Education Inc signaled tough days ahead as they trimmed their student enrollment outlook.
Washington Post, which gets about 60 percent of total revenue from its education business, also warned that the segment would see more restructuring costs in 2011.
While the company's stock gained as much as 5 percent, analyst Safalow reckons "every value in the stock remains a sale" for the forseeable future given the weakness in its education and newspaper businesses.
The company is also facing a print advertising slump that has seen many U.S. newspapers shift their focus to their online business.
In the second quarter, revenue from Washington Post's education division declined 15 percent, as new student enrollment continued to slide at its Kaplan Higher Education unit.
Newspaper publishing revenue fell 6 percent, largely on reduced advertising.
However, both its cable television division and its broadcasting unit saw improved sales for the quarter, while cost cuts helped lower operating expenses by 4 percent.
The company earned $5.92 per share from continued operations, topping analysts' expectations of $5.87 per share, according to Thomson Reuters I/B/E/S.
Operating revenue fell 10 percent to $1.07 billion, missing market estimates $1.09 billion.
"Expectations were low heading into the quarter and they did a little bit better but I would hardly characterize these results as good," analyst Safalow said.
Shares of the company, which shed 19 percent of their value after touching a year high in February, were trading up more than 3 percent at $378.72 in low volumes on the New York Stock Exchange.
The broader Dow Jones U.S. Media Index was down 3 percent in morning trade. An S&P index of U.S. education stocks was down around 2 percent.
(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Viraj Nair)
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