Corinthian Colleges rises on credit update

Associated Press

NEW YORK (AP) -- Shares of Corinthian Colleges jumped Tuesday after the for-profit education company said it met a government financial responsibility standard.

THE SPARK: Colleges have to meet standards set by the U.S. Department of Education in order to participate in federal financial aid programs for students. The department assigns financial responsibility scores to colleges based on their equity, net income, and reserves.

Corinthian Colleges Inc. said Tuesday that it met the agency's thresholds in its latest fiscal year. The company did not meet that threshold in fiscal 2011. If it had fallen short of government standards again, it could have been subject to additional monitoring and reporting and could have been required to post a letter of credit from a bank in order to continue participating in federal financial aid programs.

THE BIG PICTURE: The Santa Ana, Calif., company runs more than 100 colleges in the U.S. and Canada under the names Everest, Heald and WyoTech. It also offers online degrees.

In 2012 Corinthian Colleges disclosed that it did not meet the Department of Education's minimum standards. The company said the department was counting a $204 million goodwill impairment charge as a standard operating expense, which hurt the company's income and its overall score. Corinthian Colleges said it disagreed with the agency's interpretation.

Corinthian Colleges is scheduled to report its fourth-quarter results Aug. 29. Analysts surveyed by FactSet expect the company to earn 3 cents per share, on average, compared with a loss of 8 cents per share a year ago.

THE ANALYSIS: BMO Capital Markets analyst Jeffrey Silber said concerns about the company's financial responsibility have been hurting its shares. He kept a "Market Perform" rating on Corinthian Colleges shares.

SHARE ACTION: Corinthian Colleges shares rose 25 cents, or 12 percent, to $2.40 in afternoon trading. The stock has traded between $1.85 and $2.97 in the last year.