DeVry (DV) Grows with HealthCare; DeVry University Lags - Analyst Blog

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On Sep 19, we issued an updated research report on DeVry Education Group Inc. (DV).

On Aug 7, DeVry announced mixed fourth-quarter fiscal 2014 results beating the Zacks Consensus Estimate for earnings but marginally missing the same for revenues.

Though the quarter was not as strong as the previous two, results were nevertheless decent as the strong revenue growth and margin expansion in the healthcare and international segments continued to mitigate the challenging environment for the flagship DeVry University.

Earnings of 73 cents increased 35.2% year over year as revenues turned positive for the first time in 12 quarters. Lower costs and a lower tax rate also aided earnings. DeVry's quarterly net sales grew 1.1% year over year.

Overall, DeVry is a high quality company. Its diversified portfolio of programs, regular strategic acquisitions and a debt-free balance sheet give it a competitive advantage. Its performance improvement plan to align costs, regain enrollment growth and make growth investments is also yielding positive results.

DeVry's revenues and earnings are being driven largely by its healthcare and international businesses — Chamberlain, Ross, Becker and DeVry Brasil. These institutions have shown significant improvement in revenues and profitability in all the quarters of fiscal 2013 as well as 2014. Especially the healthcare institutions, Chamberlain and Ross, are gaining from strong demand for jobs in the healthcare fields across the U.S. With strong growth witnessed in the last two years, management believes the medical and healthcare, and international segments are poised to increase organic revenues and operating income at a double-digit pace over the next three to five years.

However, the core business — the DeVry University — accounting for almost half of the company's revenues, has been recording enrollment declines and lower revenues. Enrollments have been going down due to weak macroeconomic environment and subsequent decline in student demand (due to the hesitancy over taking a loan). DeVry University starts have been declining for several years and are expected to remain a challenge in the near term as well as prospective students are apprehensive of pursuing a higher degree as well as the job market. The competitive landscape is also intense. In order to boost enrollment growth, the company is offering scholarships and other operational initiatives. However, such efforts put pressure on revenue per student and thereby, profitability.

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The Business, Technology and Management segment which includes operations of the DeVry University needs to show sustained enrollment growth and improved profitability, not expected even in fiscal 2015.

Other Stocks to Consider

DeVry carries a Zacks Rank #3 (Hold). Other stocks in the education industry that are worth considering include Grand Canyon Education, Inc. (LOPE), Strayer Education, Inc. (STRA) and Apollo Education Group, Inc.(APOL). All the three stocks carry a Zacks Rank #2 (Buy).


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STRAYER EDUC (STRA): Free Stock Analysis Report

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DEVRY EDUCATION (DV): Free Stock Analysis Report

GRAND CANYON ED (LOPE): Free Stock Analysis Report

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