Sector Snap: For-profit education stocks rise

Education stocks rise on solid DeVry results and positive budget outlook for Pell program

Associated Press

NEW YORK (AP) -- Shares of for-profit education companies traded higher on Thursday after DeVry Inc. reported strong quarterly results and the federal government said the Pell Grant Program, which provides financial aid to low-income students, is in better financial shape than expected.

The Congressional Budget Office reported Wednesday that Pell is on pace to run a surplus in 2013 and 2014. William Blair & Co. analyst Brandon Dobell said many people in the education sector expected a budget shortfall and a 20- or 30-percent cut in the program's budget. He said that postpones a debate about the program's finances to 2014 or later, when larger concerns about the federal budget should be resolved.

"In a fiscal environment where unbudgeted programs are all under intense scrutiny, we believe this is a major victory for college students, but in particular for-profit students, who are more likely to be eligible for Pell funding as a result of lower incomes and financial independence," said Dobell.

Also on Wednesday, DeVry reported second-quarter earnings that topped Wall Street expectations, and it said new enrollments rose. For-profit education companies have struggled for more than a year with the impact of new government regulations and increased scrutiny from the media. DeVry's revenue fell for the sixth straight quarter, but it was still better than analysts forecast.

DeVry shares rose $4.38 or 16.8 percent, to $30.50 in afternoon trading.

Elsewhere, shares of American Public Education Inc. rose $1.30, or 3.3 percent, to $40.26. Apollo Group Inc. stock gained 59 cents, or 2.9 percent, to $20.64. ITT Educational Services Inc. added 84 cents, or 5 percent, to $17.66. Shares of Grand Canyon Education Inc. picked up 12 cents to $24.48. Strayer Education Inc. shares advanced $3.09, or 5.3 percent, to $61.36.

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