DeVry: Creating A Workforce Or Cutting Employees?

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The for-profit education industry has long been in decline. Over the past five years, these post-secondary education stocks have tumbled. Many take note of the demise of Corinthian Colleges, whose stock once traded as high as $35.81 in 2004, as a warning sign of deception and fraud in the industry.

Some other notable names in the space, and their subsequent five-year slide include:

  • American Public Education, Inc APEI: High of $49.29, now trades at $20.64.
  • Apollo Education Group APOL: High of $58.29, now trades at $8.18.
  • ITT Educational Services, Inc ESI: High of $95.52, now trades at $3.15.

Another name under pressure has been DeVry Education Group Inc DV, whose stock in February fell from the $26 level on FTC reports that the company made deceptive claims that 90 percent of graduates would land jobs within six months. There was also chatter the company was looking to make several hundred layoffs in the near future. With the help of Indeed, Benzinga was able to see job postings compared to competitors leading up to these recent events.

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There is a notable drop-off in late June 2015, followed by a steady decline heading into the new year. So what spurred this drastic change?

A simple reason would be that the company's business is enduring a tough period. Another reason could be that they are prepping for coming legal pushback from Defense to Repayment rulemaking by the Department of Education.

DeVry 'Most Concerning'

Credit Suisse's Trace Urdan, in a note on March 28, believed the changes being proposed could have "as great an impact on the industry as the controversial Gainful Employment rules." In his research, he noted that litigation is likely to increase in the area, with the greatest risk facing for-profit education sectors. Urdan noted to Benzinga that DeVry is the name he is most concerned with in light of these potential rule changes.

Urdan believes the potential job cuts wouldn't be a cause of this ruling, but rather to a declining core business. The cuts actually may be beneficial for investors, as the company becomes leaner. Either way, Urdan said the media coverage surrounding this issue has been light, and doesn't expect it to pick up until July when the Department of Education's draft will be reviewed.

Takeaway

DeVry continues to face not only FTC legal pressure, but also industry rule changes. DeVry job postings are decreasing and there is chatter of several hundred cuts ahead. Despite this, the company has held up well compared to many of its peers over the past five years. It remains to be seen the impact this new post-secondary legislation will have on not only DeVry, but their competitors as well.

The company has politely refused comment multiple times since January.

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Posted In: Analyst ColorEducationRumorsLegalTop StoriesExclusivesAnalyst RatingsGeneralCredit SuisseIndeedTrace Urdan
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