DeVry Shares Fall On Profit Warning, Low Enrollments

Shares of U.S. for-profit education companies fell on Tuesday after DeVry Inc. warned of low enrollments and a profit miss, hinting at a slow recovery for the industry.

DeVry lost nearly $550 million of its market value, as its shares slid 30 percent to a six-and-a-half-year low. The S&P Education sub-index fell 9 percent.

DeVry said on Monday it was cutting about 570 jobs in an effort to align costs with declining enrollments.

Enrollments at U.S. for-profit colleges have taken a hit after a government crackdown on high levels of student debt forced colleges to tighten admission standards or risk losing federal aid.

DeVry was one of the last companies in the industry to change its practices to comply with new regulations. The rebound in enrollments at the company is therefore likely to trail those at its peers.

The company was one or two quarters behind others in the sector, Wells Fargo analyst Trace Urdan said.

At least two brokerages downgraded their rating on the stock on concerns of a quick recovery, while several others reduced their price targets.

Macro slowdown, declining consumer confidence and employment uncertainty make an enrollment recovery less likely in the near term, Citigroup analyst James Samford said.

Smaller rival Capella Education Inc. earlier in the day posted a higher-than-expected profit and the company said student enrollments could increase in its third quarter ending September.

Market leader Apollo Group Inc. said last month it expected student sign-ups to fall for another quarter and that it would cut costs.

Wells Fargo's Urdan said the rest of the earnings season for the sector would not be inspiring.

"Each school will get there (recovery) at slightly different times, but (new enrollment) growth should be more positive than negative by the second half of 2012," Urdan said.

DeVry's shares fell to a low of $19.32 on Tuesday on the New York Stock Exchange. Peers Strayer Education, Education Management and ITT Educational Services were all down more than 5 percent.


Leave a Reply

Be the First to Comment!

Notify of