) announced first quarter fiscal 2013 earnings of $0.49 per
share, which beat the Zacks Consensus Estimate of $0.31 by 58%.
Higher-than-expected cost savings and improving new student
enrollments at several institutions drove the earnings beat.
Earnings, however, declined 41% from the prior-year quarter due
to lower year over year revenue.
Continued progress on its performance improvement plan to
align costs, regain enrollment growth and make growth
investments, helped the company to deliver a turnaround from the
past few weak quarterly results.
In order to combat declining profits and student enrolments,
DeVry has undertaken cost-saving initiatives like workforce
reduction and curbed discretionary spending. Additionally, in
order to revive enrollment growth, the company is working on its
marketing efforts to build brand awareness; building
relationships with high schools, community colleges,
corporations, and government/military institutions; and improving
its technology. DeVry is also making targeted investments to
drive future growth like opening new campuses, diversifying into
new high demand education programs and investing in its
DeVry's quarterly net sales fell 7.0% year over year to $482.7
million due to lower year over year enrollment growth. Revenues,
however, beat the Zacks Consensus Estimate of $481 million mainly
attributable to better than expected new enrollment growth at
The company's total postsecondary enrollments across all its
programs were down 6.1% from the prior-year quarter. However, the
company witnessed solid new enrollment growth in healthcare
institutions like Chamberlain College of Nursing and Carrington
Colleges. DeVry has been witnessing persistent enrollment
declines as a result of overall economic downturn and lack of
student confidence. Further, modifications made to the business
to comply with new regulations have also been hurting enrollment
Operating costs declined 0.5% year over year and almost 6%
sequentially to $439.9 million owing to DeVry's cost saving
initiatives. DeVry is trying to reduce volume related costs to
better align them with declining enrollments. Costs of
educational services increased 1.8% and student services and
administrative expense declined 3.2% in the quarter.
Business, Technology and Management segment: This segment
includes operations of the company's largest subsidiary, DeVry
University, which offers both graduate and undergraduate courses.
The segment recorded revenue of $284.6 million, down 15.7% year
over year due to a decline in both undergraduate and graduate
Combined, the total undergraduate and graduate enrollment in
the September session decreased 9.4%. Enrollments continued to be
hurt by adjustments to new regulation and overall economic
Adjusted segment earnings declined 58.3% in the quarter to
$25.6 million due to top-line and enrollment declines and
resulting margin compression.
Medical and Healthcare segment: The segment consists of Ross
University Medical and Veterinary Schools, American University of
the Caribbean (AUC), Chamberlain College of Nursing and
The segment reported revenue of $158.4 million, up 7.4% year
over year driven by solid new enrollment growth. DeVry Medical
International includes Ross University and AUC.
Overall the medical institutions gained from the company's
efforts to boost enrollment, which resulted in better quality
enquiries and improved conversion and retention rates. The
Chamberlain College of Nursing benefited from new campus openings
in the past two years.
Total enrollments increased 20.2% at the Chamberlain College
of Nursing and 2.1% at DeVry Medical International, while they
declined 8.3% at the Carrington Colleges Group.
Adjusted segment earnings improved 8.1% to $25.2 million
driven by revenue growth and cost savings from turnaround
K-12 and Professional Education segment: The segment includes
professional exam review and training operations of Becker
Professional Review, DeVry Brasil and Advanced Academics.
The segment recorded revenue of $39.8 million, up 17% year
over year as solid enrollment growth at DeVry Brasil and benefits
from the acquisitions were offset by revenue declines at Advanced
The segment operating loss narrowed in the quarter driven by
lower operating loss at Advanced Academics and significant
operating leverage at DeVry Brasil and Becker.
For fiscal 2013, the company expects total operating costs to
increase from 2012 levels, as the company invests in its growing
businesses and integrates acquisitions. Cost increases at its
growth institutions like Chamberlain, Ross, Becker and DeVry
Brasil are expected to more than offset savings at its transition
institutions like DeVry University Advanced Academics and
The company is following a strict cost-control routine and is
particularly looking to combat escalating costs at the DeVry
University and Carrington Colleges. The company's focus on cost
control is expected to result in additional cost savings of $60
million in fiscal 2013, higher than prior expectations of $50
million as it is ahead of its cost saving targets.
In the second quarter, DeVry expects cost to be higher than
the first quarter. New student enrollments are expected to be
positive at Carrington while those at DeVry University are
expected to decline year over year.
The stock carries a Zacks #2 Rank in the near term ('Buy'
rating). DeVry competes with
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