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DeVry Education Beats on Q1 Earnings & Sales, Down Y/Y

DeVry Education Group, Inc.DV reported year-over-year declines in both earnings and revenues in the first quarter of fiscal 2016.

Quarterly results were mostly hurt by the repositioning of DeVry University and unfavorable translation of the Brazilian real.

Despite beating the Zacks Consensus Estimate of 36 cents by 5.6%, fiscal first-quarter adjusted earnings of 38 cents per share declined 19.2% year over year. Earnings were hurt by soft enrollment trends at DeVry University and unfavorable Brazilian currency translations.

DeVry's quarterly net sales declined 4.5% year over year to $441.4 million but surpassed the Zacks Consensus Estimate of $440 million by 0.3%, owing to weak enrollment at DeVry University, partially offset by strong growth of enrollment in the Medical and Healthcare, and International and Professional Education segments.

DeVry Education Group's total enrollment increased 15.7% year over year in the fiscal first quarter while new enrollment increased 43.3%.

Segment Details

Business, Technology and Management: This segment includes operations of the company's largest subsidiary, DeVry University, which offers both graduate and undergraduate courses.

The segment recorded revenues of $159.5 million, down 21.7% year over year due to weak enrollment trends at DeVry University. DeVry University has been witnessing declining enrollment trends over the past many quarters due to soft demand.

In line with the company's guidance, total enrollment and new enrollment of undergraduate students declined 20.1% and 24%, respectively in the September session. On a same-campus basis (excluding campuses moving to an online-only delivery), total enrollment and new enrollment of undergraduate students declined 10.5% and 16%, respectively.

Enrollment of graduate course takers, including the Keller Graduate School of Management, declined 16.7% during the quarter.

The company is undertaking several student-focused initiatives at DeVry University to return to growth and transform this business. In order to drive growth in the near term, the company intends to invest in its strongest markets and programs, reduce its cost structure, and re-launch the DeVry University brand. The company is also planning improve its teaching and learning model, affordability and strengthen employer workforce solutions. However, the efforts do not seem to paying off yet.

Medical and Healthcare: Medical and Healthcare is the now company's largest segment. The segment consists of DeVry Medical International, Chamberlain College of Nursing, and Carrington.

The segment reported revenues of $224.0 million, up 8.7% year over year, as soft revenues at Carrington Colleges and flat results at DeVry Medical International were offset by strong revenues at Chamberlain College of Nursing.

At Chamberlain College of Nursing, revenues escalated 22.4% driven by new campus opening and solid enrollment growth of post licensure programs (including Family Nurse Practitioner and RN to BSN program). This increase was driven by solid demand for nurses with advanced degrees.

For the September session, total enrollment surged 23.3%, exceeding the company's expectation of an increase of 20%-22%. New enrollment grew 27.9%, above the company's expectation of an increase of 23%-25%. Chamberlain opened a new campus in Irving, TX during the first quarter of fiscal 2016 and received approval to open a new campus in Charlotte, NC in Jan 2016.

At DeVry Medical international, revenues increased a mere 0.5%. Total enrollment for the September 2015 session rose 2.2%, exceeding the company's expectation of a 1%-2% increase. New enrollment increased 17.7%, exceeding the company's expectation of an increase of 16%-17%.

At Carrington Colleges, revenues decreased 2.4% in the quarter. Total enrollment decreased 1%, which is better than the company's guidance of a 3%-4% decrease. However, new enrollments decreased 1.5%, which did not meet the company's guidance of an increase of 3%-4%. Nevertheless, the company expects improved results through the rest of fiscal 2016, as the company will transplant programs into existing campuses, introduce online programs and continue disciplined cost control.

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 $58.7 million, up 10.3% year over year. However, segment revenues were hurt by unfavorable Brazilian currency translations. On a constant currency basis, revenues increased 47%.

DeVry Brasil revenues grew 13.3% year over year driven by the acquisitions of FMF, Faci and Damásio, as well as better organic growth. On a constant currency basis, revenues increased 80.2%. Total enrollment increased 72.1%, which was in line with the company's expected range of a 70%-75% increase. New enrollment increased 176%, which feel short of the management's expectation of a 180%-190% increase.

Becker Professional Education's revenues increased 6.6% year over year. This increase was driven by solid demand for CPA and U.S. Medical Licensing Exam test preparation courses.

Second Quarter Fiscal 2016 Outlook

During the second quarter 2015, the company expects revenues to decrease about 6% year over year owing to unfavorable currency translation in Brazil and the repositioning of DeVry University. Operating costs are expected to decrease at the same rate as the revenue versus prior-year quarter. Effective income tax rate is expected to be around 20% range.

Outlook

The company expects organic revenues to increase between 5% and 7% from fiscal 2016 to 2020. EBITDA is expected to increase between 10% and 12% during the same period.

DeVry carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the education industry are New Oriental Education & Technology Group Inc. EDU , Bridgepoint Education, Inc. BPI and K12, Inc. LRN . While New Oriental Education & Technology Group sports a Zacks Rank #1 (Strong Buy), Bridgepoint Education and K12 hold a Zacks Rank #2 (Buy).

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DEVRY EDUCATION (DV): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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