Dismal 2Q for DeVry - Analyst Blog
January 27 2012 - 7:00AM
Zacks
DeVry Inc. (DV)
registered sluggish second quarter 2012 earnings of 13 cents per
share, which crushed down 89.6% from $1.25 per share posted in the
year-ago period. Earnings also lagged the Zacks Consensus Estimate
of $1.08 by 87.9%.
Management acknowledged that
deteriorating economic conditions and rising unemployment have
negatively impacted the results. Moreover, the new regulations
associated with the education system posed as headwind for the
company. However, DeVry continues to focus on increasing new
student enrollments, and generate operating efficiencies to reduce
expenses, while balancing the necessary investments in
providingacademic quality and student services for longer-term
growth. It gives importance to academic quality and strong
execution of diversification strategy.
Consolidated Revenue and
Margins
DeVry’s quarterly net sales fell
5.0% to $524.0 million compared with $551.5 million in the
prior-year period. Sales also lagged the Zacks Sales Estimate of
$544 million.
Operating cost and expenses climbed
to $510.3 million compared with $415.9 million a year ago.
As a result, operating income
declined sharply to $13.75 million in the quarter, compared with
$135.5 million in the year-ago period.
Total graduate course takers at
DeVry University slipped 12.8% in the fall and new undergraduate
enrollment also shrank 24.6%. However, at Keller Graduate School of
Management, the number of course takers in November 2011 increased
0.3%.
The decline in total enrollment was
theresult of the changes that were brought in accordance withnew
regulations and persistent unemployment, which continued to affect
consumer confidence.
The DeVry Medical International
segment, continued with its expansion of its facilities and making
investments in academic quality, such as simulation and other
advanced student teaching techniques. The integration of American
University of the Caribbean School of Medicine is progressing on
track.
In Chamberlain College of Nursing,
total student enrollment in the period increased more than 26%,
while new student enrollment in the fall decreased 1.6%.
Chamberlain plans to open new
locations in Indianapolis, Atlanta and Cleveland, by end ofcalendar
year 2012.
Total student enrollment at
Carrington Colleges declined 28.4% and new students declined 33.0%
for the fall period. This group of colleges openeda new location in
the Dallas metro area, and continues to focus on expanding its
program offerings both onsite and online.
In the International, K-12, and
Professional Education Segment, Becker Professional Education shed
its Stalla CFA business and released its enhanced 2012 version of
its CPA exam review product.
DeVry Basil, opened new Ruy Barbosa
campus building in Salvador; a new campus in Sao Luis; and
continues with other campus renovations and investments in academic
quality.
Other Financial
Updates
DeVry exited the year with cash and
cash equivalents of $285.7 million at December 31, 2011, down from
$447.1 million at June 30, 2011 and $459.3 million at the end of
December 31, 2010. Operating cash flows were $32.4 million in the
second quarter of 2012, owing to strong working capital management.
DeVry spent $63.0 million as capital expenditure.
During the second quarter, DeVry
completed its sixth stock repurchase program and commenced the
seventh program. The company repurchased 1.25 million shares of its
common stock at a cost of approximately $47.6 million, or $37.95
per share.
The year has started on a slow
note, adversely impacted by enrollment deceleration and tougher
year-over-year comparisons. Nonetheless, the company is expected to
pick the momentum in the second half of the year.
However, risks relating to
regulatory matters, vulnerability to seasonal fluctuations and high
dependence on government aid programs are matters of concern.
DeVry, which competes with
Apollo Group Inc (APOL), maintains anUnderperform
rating on a long-term basis. Currently, DeVry holds a Zacks #4
Rank, which is equivalent to a short-term Sell rating.
APOLLO GROUP (APOL): Free Stock Analysis Report
DEVRY INC (DV): Free Stock Analysis Report
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