Stifel Downgrades DeVry From Buy To Hold, Cuts Estimates

In a report published Monday, analysts at Stifel downgraded

from Buy to Hold, while reducing the estimates for the company. DeVry is expected to post flat results for 2016 despite aggressive cost cuts and growth in the International and Med/HC segments. Stifel had expected the company's earnings to grow, driven by the HC and International segments mitigating the decline and eventual recovery of BTM (business, tech, management). However, recent results suggest that the BTM recovery could take longer than earlier expected. In fact, the analysts believe that "BTM revenues should decline in FY17, before a new strategic plan being implemented generates growth." The company appears well positioned, especially in the healthcare and technology segments, to deliver a good track record of placement and starting salaries, which should translate to a good value proposition. "Diversification and cost reductions have helped stabilize earnings, but we also consider the extended challenges in BTM, flattish earnings, a valuation (EV/EBITDA) inline to slightly above the peer group, and a 12-month rating system," the analysts explained. The EPS estimate for 2015 has been lowered from $2.68 to $2.58 due to expectations of marginally lower revenue in 3Q and 4Q. The EPS estimate for FY16 has also been lowered from $2.95 to $2.65, based on the expectations of revenue declines in BTM. Stifel believes that there are limited catalysts for the stock in the foreseeable future.