Corinthian Colleges Shares Fall on Warning

Shares of college and technical school operators got low marks Friday after an earnings warning from Corinthian Colleges Inc. sparked a sell-off.

Corinthian’s shares slumped more than 25% after ascending to a 52-week high, and shares of five other education companies headed lower as well on Nasdaq.

Late Thursday, the Santa Ana company reported earnings that were generally in line with expectations, but warned that its fiscal first-quarter results could be lower than current Wall Street targets.

The stock on Friday tumbled $13.50 a share to $39.35 on Nasdaq. A day earlier, the shares had climbed to $55.47 during the session, their highest level in the last year.

As part of an ambitious expansion, the company has assumed the cost of new schools and courses, which won’t add to revenue and earnings until about the first half of next year, said Greg Cappelli, an analyst with Credit Suisse First Boston.

Corinthian and other education stocks “have had terrific runs in this market and are higher-valuation stocks to begin with,” Cappelli said.

The company will shut a campus acquired last year in Pleasanton, Calif., because of the weakening economy in Silicon Valley.

*

Reuters and Bloomberg News were used in compiling this report.