DeVry Education Group Inc.
) beat the Zacks Consensus Estimate for both revenues and
earnings in the third quarter of fiscal 2014, for the second
quarter in a row.
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Adjusted earnings of 87 cents per share beat the Zacks Consensus
Estimate of 75 cents by 16.0% in the third quarter of fiscal
2014. We believe that the company's return to positive enrollment
in the quarter contributed to the earnings beat. Earnings,
however, declined 6.5% from the prior-year quarter due to a
year-over-year decline in total revenue.
Adjusted earnings exclude restructuring charges (related to
workforce reduction and real estate optimization) and gain on
sales of assets.
Revenues and Enrollments
DeVry's quarterly net sales fell 1.5% year over year to $496.1
million as the relatively strong growth in the healthcare,
professional and international businesses was offset by continued
revenue decline at the flagship DeVry University, which accounts
for half of the revenues.
Revenues, however, beat the Zacks Consensus Estimate of $492
million, which, we believe, was due to strong sales at growth
institutions like Chamberlain, Ross, Becker and DeVry Brasil.
The company's total post-secondary enrollments across all its
programs were up 1.7% driven by double-digit enrollment increase
at the Chamberlain College of Nursing and DeVry Brasil.
Operating costs (excluding restructuring charges) decreased
slightly year over year to $426.6 million in the third
quarter. Cost of educational services increased 2.5% and
student services and administrative expenses decreased 2.9% in
The company is following a strict cost-control routine and is
particularly looking to combat escalating costs at DeVry
University and Carrington Colleges.
Business, Technology and Management:
This segment includes operations of the company's largest
subsidiary, DeVry University, which offers both graduate and
The segment recorded revenues of $241.9 million, down 14.7% year
over year, due to lower enrollments and lower revenue per student
(down 1%). DeVry University has been witnessing enrollment
declines for the past few quarters as a result of overall
economic downturn and lack of student confidence, which has
Higher use of scholarships during the past several sessions to
lure students is lowering revenue per student.
For the March session, total undergraduate student enrollments,
and graduate course takers at Keller College declined 10.4%, and
15.1% respectively. Total undergraduate student enrollments
decline was narrower than 15.1%, and 18.0%, respectively in the
New undergraduate student enrollment declined 2.5% for the March
session, narrower than a decline of 7.9% in the January session.
In the quarter, the company reported adjusted income of $23
million, lower than $35.0 million in the prior-year quarter due
to lower revenues and decreased operating leverage.
Medical and Healthcare:
The segment consists of Ross University Medical and Veterinary
Schools, AUC, Chamberlain College of Nursing and Carrington
The segment reported revenues of $204.6 million, up 16.8% year
over year, driven by growing demand and campus expansions.
Total enrollments increased 37.4% at the Chamberlain College of
Nursing for the March session versus 32.2% in the January
session, owing to strong demand for Family Nurse Practitioner and
Doctor of Nurse Practitioner degree programs. However, the same
decreased 2.4% at the Carrington Colleges Group for the three
months ended Mar 31, 2014 but increased 13.5% at DeVry Brazil for
the March term.
New student enrollments (online only) increased 55.5% at the
Chamberlain College of Nursing for the March session compared
with 55.7% in the January session. However, new enrollments
declined 6.0% at the Carrington Colleges for the three months
ended Mar 31, 2014, and 19.7% at DeVry Brazil for the March term.
Carrington Colleges' new enrollments have slowed down in the past
few quarters from double-digit increases seen in the first three
quarters of fiscal 2013 as the company suspended recruitment for
some non-core programs as part of its turnaround efforts.
Segment operating income improved 28% in the quarter to $46
million due to narrower losses as a result of turnaround efforts
at Carrington and a solid increase in Chamberlain's post
International and Professional Education:
The segment includes professional exam review and training
operations of Becker Professional Review and DeVry Brasil.
The segment recorded revenues of $50.8 million, up 9.7% year over
year, largely driven by top-line growth at both DeVry Brasil and
Becker. DeVry Brasil revenues grew 15% in the quarter, gaining
from the recent acquisition of Facid as well as strong organic
growth. Becker Professional Education's revenues increased 5%
year over year.
DeVry ended the quarter with cash and cash equivalents of $396.8
million as of March 31, 2014, compared with $262.0 million at the
end of the second quarter of fiscal 2014.
Fourth Quarter 2014 Outlook
For the fourth quarter of fiscal 2014, the company expects
revenue growth from all the institutions except DeVry University.
The company expects operating cost to decline year over year, but
increase sequentially in the quarter.
For fiscal 2014, capital spending is expected to be in the range
of $70 million to $80 million, lower than prior expectations of
$90 to $100 million. The company has also raised its total cost
savings target for institutions in transition to at least $100
million, up from prior expectation of $60 million.
DeVry carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other stocks worth considering in the building/construction
Apollo Education Group, Inc.
Strayer Education Inc.
TAL Education Group
). All the companies carry a Zacks Rank #2.