K12 Inc. (NYSE: LRN) profit falls 46%

Northern, WI 2/7/12 (StreetBeat) Herndon-based K12 Inc. (NYSE: LRN) suffered a 46 percent drop in net income in its latest quarter as higher expenses overwhelmed higher revenue.

K12, which provides software and support to educators teaching students in kindergarten through 12th grade, reported revenue up 29 percent to $166.5 million in its fiscal 2012 second quarter ended Dec. 31, 2011, due mostly to stronger internal growth.

However, the top line expansion did not translate to the bottom line as net income fell to $4.2 million, 11 cents per diluted share, compared with $7.8 million, 23 cents per diluted share, a year ago as expenses surged 39 percent to $159.4 million.

The company is not forecasting fiscal year 2012 earnings, but expects revenues to be int he $680 million to $690 million range.

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K12's (NYSE:LRN) Shares Dropped: What You Need to Know

Palm Beach, FL 12/13/11 (StreetBeat) --Shares of e-learning specialist K12 (NYSE: LRN) dropped as much as 13% overnight on extremely high volume.

So what: The New York Times today contains a front-page story on online charter schools, specifically centered on schools run by K12. The multimonth investigation paints K12 in a very harsh light: "A portrait emerges of a company that tries to squeeze profits from public school dollars by raising enrollment, increasing teacher workload and lowering standards."

Now what: The Times hints at a coming collapse of the whole online learning industry unless these profit-grabbing practices are curbed. "These folks are fundamentally trying to do to public education what the banks did with home mortgages," says one expert in the story.

Negative sentiment has not spilled over into rival stocks DeVry (NYSE: DV) or Apollo Group (Nasdaq: APOL) , even though the Times could just as easily have focused its damning analysis on them. This stock is an official Rule Breakers recommendation, but I wouldn't touch the e-learning industry with a 10-foot network cable.

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