DeVry Education (DV) to Buy Damasio Educacional in Brazil - Analyst Blog

DeVry Education Group, Inc.'s (DV) share price rose around 1% on Dec 17, after the education company announced that its subsidiary, DeVry Brasil, has agreed to buy Damásio Educacional for an undisclosed amount.

Damásio is one of the largest providers of test preparation for the bar examination in Brazil and also offers undergraduate and graduate law programs.

Damásio is currently operated by a private equity firm, Victoria Capital Partners. The transaction is expected to be completed in Feb 2015, subject to all regulatory approvals.

Damásio, which serves more than 50,000 students through a network of approximately 220 learning center, is expected to generate revenues of approximately $50 million in calendar 2014. The acquisition is thereby expected to be modestly accretive to DeVry's earnings in fiscal 2015.

DeVry Brasil, which operates in the northeast region of Brazil, offers undergraduate and graduate programs in the fields of business management, medical, healthcare, law and engineering through its eight institutions.

DeVry Brasilis part of DeVry's International and Professional Education segment. This segment also includes operations of Becker Professional Review which offers professional exam review and training programs for many popular certification examinations. The operations of ATC International and Falcon Physician Reviews, acquired in Apr 2011 and Apr 2012, respectively, are also included in this segment.

The segment has been doing quite well for the past few quarters. In the last reported quarter – first-quarter fiscal 2015 – revenues of this segment grew 22% year over year driven by top-line growth at both DeVry Brasil and Becker. While DeVry Brasil's revenues grew 25%, that of Becker Professional Education increased 18% from the year-ago period.

In fact, DeVry international/professional institutions, coupled with the medical schools, 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 over the last two years, management believes that 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. In fact, the healthcare and international segments are expected to contribute a progressively larger portion of revenues/earnings in fiscal 2015.

Stocks to Consider

DeVry carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the education industry include Strayer Education, Inc. (STRA), Capella Education Company (CPLA) and Grand Canyon Education, Inc. (LOPE). All these companies sport a Zacks Rank #1 (Strong Buy).