As credit crisis aggravated and companies shed tens of thousands of jobs across nation every month, attendance at Universities and schools soared as unemployed workers returned to classroom to upgrade skills and beef up their resume. In past recessions as well, enrollments at universities grew at astronomical rates, while the stocks of so called "for profit" education stocks held up well. However, the current crisis seems to have taken a toll on education sector as well, which till now was being seen as "recession proof".

Harvard University on Monday announced that it is considering spending cuts and may very well revise the compensation costs. In an email to faculty, staffs and students Harvard President Drew Faust warned that “we must recognize that Harvard is not invulnerable to the seismic financial shocks in the larger world. Our own economic landscape has been significantly altered”. Faust also indicated that University's $36.9 billion endowment stands to face huge losses as economic outlook worsens. She added "while we can hope that markets will improve, we need to be prepared to absorb unprecedented endowment losses and plan for a period of greater financial constraint. Given the breadth and the depth of the present downturn, even well-diversified portfolios are experiencing major losses.” However, Faust's spokesman declined to comment on the size of the loss. In the year ended June 30, Harvard's endowment returned 8.6% in the year while Standard & Poor's 500 index lost 13.1% in the same period. The university is also planning to put a brake on its expansions plan as federal grants and contributions from donors and foundations dried up while performance of endowment plans dipped.

Universities and colleges across the nations are freezing their budgets and are delaying projects to face what is being seen as the worst economic crisis since Great Depression of 1929.

However, at a time when bigger names are coming up with gloomy outlook, some of the education stocks have performed quite well when compared with broader market. One such company is Phoenix, Arizona based Apollo Group, Inc. (NASDAQ: APOL) offers associate, bachelor, master, and doctoral degrees in business, criminal justice, general studies, health administration, and information technology. The stocks of the company haven't stopped rallying ever since it announced stellar fourth quarter results on 28th October. For the quarter ended August 31, the net earnings of the company more than doubled to $229.6 million or $1.43 a share from $13.2 million or 60 cents a share in the same period in 2007. Revenue climbed 17% to $831.4 million. Analysts on an average expected company to earn 67 cents a share on revenue of $802 million. The company saw a record enrollment of 83,100 students, a rise of 19.1% in the quarter. The shares of the company have climbed over 17% after it declared results and are currently trading at $69.27.

Yet another company, Corinthian Colleges (NASDAQ: COCO) saw its quarterly net income climbing by 40% to $5.5 million, or 6 cents a share from $2 million, or 2 cents a share in the corresponding quarter in 2007. Enrollments jumped 7.3% to 30,075 from 28,030 a year earlier.

Similarly, enrollments at Strayer University (NASDAQ: STRA) surged 24% in fall term, enabling it to post a decent third quarter net profit of $11.8 million or 83 cents a share, a rise of 27% from $9.3 million or 64 cents a share in the same period a year ago.

Though these education stocks have delivered impressive earnings on the back of strong enrollment figures, it remains to be seen whether these companies will be able to maintain the same pace of growth in the event of a deep and protracted recession.

 

Disclosure: Author does not own any of the stocks discussed here.