Recently, the president and CEO of
DeVry Inc.
(
DV
), one of the largest providers of higher education services in
North America, discussed the company's growth prospects in the
coming years at the BMO Capital Markets' Back to School Conference.
The discussion centered on the company's strong performance in
Brazil and its strategies to improve business at DeVry University
and Carrington Colleges Group.
Brazil
DeVry intends to increase its share of the educational market in
Brazil, particularly in Northeast Brazil. With a GDP growth of
5.1%, the country is growing at a fast pace and soon there will be
a huge demand for skilled labor. There is a disparity between the
skills required by the industry and those of students, thus
creating a demand for career-oriented programs.
Recently the company acquired Faculdade do Vale do Ipojuca
("FAVIP"). FAVIP, which is based in Fortaleza, Ceará, Brazil will
form a part of DeVry Brasil. Following its integration into DeVry
Brasil, FAVIP will benefit from the academic expertise of DeVry
Brasil, and other infrastructural support. FAVIP is one of the
fastest growing educational institutions and will be able to
capitalize on the opportunities that will come with this
acquisition.
Previously, in February 2012, DeVry acquired the Faculdade Boa
Viagem to expand its presence in Northeastern Brazil. By the end of
fiscal 2013, the company expects DeVry Brasil to generate revenue
in the range of $80 million to $90 million. DeVry Brasil has been
seeing strong growth in enrollments, even though the rest of the
company is witnessing declines.
DeVry University and Carrington Colleges Group
DeVry has been suffering on account of persistent decline in
enrollment due to the weak macroeconomic environment and subsequent
decline in demand for courses (due to the hesitancy over taking a
loan) in the U.S. Further, modifications made to the business to
comply with new educational regulations have also been hurting
enrollment growth. Other than enrollment declines, DeVry had a
tough time due to heavy investments in scholarships to support
students who are facing the brunt of recent cuts to the Pell Grant
program.
This was reflected in the company's performance in the fourth
quarter of 2012. One of the largest higher educational institutions
in North America, DeVry University reported $301.6 million of
revenue, down 15.7% year over year largely due to decline in total
undergraduate enrollments.
On the other hand Carrington Colleges Group, which operates under
the Medical and Healthcare segments of the company, reported a
19.7% decrease in new enrollment in the fourth quarter of 2012.
Total enrollment also declined 25.7% in the fourth quarter of 2012.
In order to improve its performance, Carrington has been focusing
on improving its cost structure by streamlining the admission
process and raising academic quality. As a result, Carrington now
expects to generate positive new enrollment growth in the October
quarter of 2012 and generate savings of least $50 million in fiscal
2013.
DeVry expects attractive earnings growth for the period 2014-2016
once the macroeconomic conditions improve. The company is expecting
DeVry University to generate modest new enrollment growth in the
second half of 2013. Carrington Colleges are expected to return to
positive enrollment and revenue growth in fiscal 2013 and gradually
grow its enrollments to 2011 levels. All other institutions are
expected to maintain their growth momentum for the 2014-2016
period, which the company defines as the recovery phase.
DeVry Inc. carries a Zacks #5 Rank in the near term (Strong Sell
rating). We currently have an Underperform recommendation on DeVry
Inc. We believe that though management is trying to boost its
business and control costs, it might take time for these
initiatives to deliver the desired results.
DEVRY INC (DV): Free Stock Analysis Report
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