APOL Apollo Education Grp., Inc.

DeVry Inc. (DV), one of the world’s leading providers of educational services, is scheduled to report its fourth-quarter 2011 financial results on Thursday, August 11, 2011. The current Zacks Consensus Estimate for the quarter is pegged at $1.03 a share. The Zacks Consensus Estimate projects $546 million revenues for the quarter.

Third Quarter 2011 Recap

DeVry, which faces stiff competition from Apollo Group Inc. (APOL) and Education Management Corporation (EDMC), revealed strong performance for the fourth quarter of 2011 as earnings climbed 17.9% from the year ago earnings to $1.32 per share. However, EPS surpassed the Zacks Consensus Estimate of $1.23 per share by 7.32%. Earnings were primarily impacted by successful implementations of growth and diversification strategies, improvement in academic quality and successful student enrollment.

Net sales for the quarter jumped 11.6% to $551 million for the reported quarter driven by 13.2% growth in Business, Technology and Management, Medical and Healthcare and Professional Education saw a 7.5% growth each.

Fourth-Quarter 2011 Zacks Consensus

Earnings estimates for the fourth quarter of 2011, as provided by the analysts, range from a low of 93 cents to a high of $1.12. Thus, the current Zacks Consensus Estimate for the quarter is pegged at $1.03 per share.

Over the past 30 days, one of the 20 analysts revised the earnings estimate downward. But the current Zacks Consensus Estimate remained at $1.03. However, the estimate inched down by one penny over the last 90 days. The fiscal earnings estimate is pegged at $4.63, which is one penny higher than the $4.62 per share estimate made by analysts 60 days ago.

Earnings History Outpaces Zacks

With respect to earnings surprises, DeVry has topped the Zacks Consensus Estimate in the preceding four quarters. Over the last four quarters, the earnings surprise ranged from a negative of 5.04% to a positive of 20.73%, with the average earnings surprise being 10.4%, suggesting that DeVry has outpaced the Zacks Consensus Estimate.

Recommendation

We are encouraged as DeVry is a leading provider of post-secondary educational services in North America. Moreover, the company has a rich experience of more than 75 years in the education industry and includes strong brands such as DeVry University and Ross University in its portfolio. The company is taking initiatives to expand its revenue streams through strategic acquisitions.

On August 9, 2011 DeVry announced that it has acquired the business operations of privately held American University of the Caribbean (AUC). The takeover will provide DeVry an edge in high quality medical and healthcare education and expand its academic offerings at the post-baccalaureate level.

However, risks relating to regulatory matters, vulnerability to seasonal fluctuations and high dependence on government aid programs are matters of concern.

Currently DeVry holds a Zacks #3 Rank. On a long-term basis, we maintain a Neutral rating on the stock with a short-term Hold rating.

 
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