On Jun 17, we issued an updated research report on
DeVry Education Group Inc.
DeVry beat the Zacks Consensus Estimate for both revenues and
earnings in the third quarter of fiscal 2014 - for the second
quarter in a row - driven by better-than-expected revenues and
aggressive expense control.
However, both revenues and earnings declined year over year as
strong growth in the healthcare and international businesses was
offset by yet another revenue decline at the struggling flagship
DeVry University due to enrollment shortfall.
Overall, DeVry is a high quality company. Its diversified
portfolio of programs, regular strategic acquisitions and a
debt-free balance sheet give it a competitive advantage. Its
performance improvement plan to align costs, regain enrollment
growth and make growth investments is also yielding positive
DeVry's revenues and earnings are being driven largely by its
healthcare and international businesses. These institutions have
shown significant improvement in revenues and profitability in all
the quarters of fiscal 2013. Especially the healthcare
institutions, Chamberlain and Ross, are gaining from increased
demand for nurses and physicians across the U.S.
However, the core business - the DeVry University - accounting
for half of the company's revenues, has been recording enrollment
declines and low profits. Enrollments have been going down due to
weak macroeconomic environment and subsequent decline in student
demand (due to the hesitancy over taking a loan). DeVry University
starts have been declining for several years and are expected to
remain a challenge in the near term.
In fact, enrollments have been sluggish across the entire higher
education system in the United States as prospective students are
apprehensive of pursuing a higher degree as well as the job market.
The competitive landscape is also intense. In order to boost
enrollment growth, the company is offering scholarships and other
operational initiatives. However, such efforts put pressure on
revenue per student and thereby, profitability.
The Business, Technology and Management segment which includes
operations of the DeVry University needs to show sustained
enrollment growth and improved profitability, not expected at least
till fiscal 2015.
Other Stocks to Consider
DeVry has a Zacks Rank #2 (Buy). Other stocks in the education
industry that are worth considering include
Grand Canyon Education, Inc.
Strayer Education, Inc.
Lincoln Educational Services Corporation
). While Lincoln Educational sports a Zacks Rank #1 (Strong Buy),
Grand Canyon and Strayer have the same rank as DeVry.
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