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DeVry Hits 52-Wk High on Strong Q2

Zacks Equity Research

On Feb 26, 2014, DeVry Education Group Inc. (DV) reached a 52-week high of $42.34 as the share price has been going up ever since it reported strong second-quarter fiscal 2014 results earlier this month. DeVry carries a Zacks Rank #3 (Hold).

Share Price Drivers

DeVry turned around from a weak first quarter by beating the Zacks Consensus Estimate for both revenues and earnings in the second quarter of fiscal 2014. Enrollments improved and costs declined from the first-quarter levels.

Earnings, however, declined 9.0% from the prior-year quarter as revenues went down 1.9% year over year. Though revenues at the flagship DeVry University, which accounts for half of the company’s revenues, continued to decline, the healthcare, professional and international businesses remained strong. DeVry’s healthcare and international institutions have shown significant improvement in revenues and profitability in all the quarters of fiscal 2013.

The company’s total post-secondary enrollments across all its programs were down 2.6% in the second quarter. However, the enrollment decline was narrower than 4.4% reported in the first quarter.

Moreover, despite a slight year-over-year increase, costs declined sequentially, pushing up profits.

The company is following a strict cost-control routine and is particularly looking to combat escalating costs at transition institutions like DeVry University and Carrington Colleges. Management expects costs at these transition institutions to decrease by a further $75 million from the fiscal 2013 levels, higher than prior expectations of $60 million.

Overall, the education sector is seeing positive momentum after President Obama expanded federal support to help more students afford a college education.

The President has doubled the Federal investments in Pell Grants, a federal student financial aid usually awarded to undergraduate students. Moreover, the President announced reforms to help students manage their loans better. Beginning the end of this year, students will be given an option to cap repayment of student loans at 10% of their monthly income. This is aimed to reduce the burden of student loans.

In addition, President Obama has succeeded in keeping interest rates on Federal student loans low for this school year.

More than 100 colleges and 40 organizations have joined the cause to help more people graduate from college.

The administration’s campaign to encourage low-income students to attend college comes as a boon to post-secondary education providers like DeVry, Strayer Education Inc. (STRA), Apollo Education Group, Inc. (APOL), American Public Education, Inc. (APEI) and many more.

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