Bear Of The Day: DeVry Education Group

Back in September, DeVry Education Group (DV - Analyst Report) presented its first Investor Day since 2009. The company unveiled a new 5-year plan that has met with disappointment by some analysts.

In particular, EPS estimates have continued moving downwards since the company revealed a bleak preliminary enrollment outlook for the September session. These downward estimate revisions pushed this year's expected earnings growth into the negative column at -1.5%, based on the Zacks Consensus.

Not Making the Grade

DeVry expects new undergraduate student enrollment to decline 24%–26% at its flagship DeVry University and total enrollments to decline 20%–22% for the Sep 2015 session. The number of graduate course takers is expected to reduce between 17% and 18%. Since DeVry University accounts for a major portion of the company’s revenues, the latest outlook is an indication that the top line may again take a hit this session.

The recent outlook reflects similar enrollment trends that the company has been reporting over the past few quarters. Though DeVry Education Group’s medical and international institutions are expected to perform well in the September session, it expects to report a persistent decline in enrollment at its flagship institution, DeVry University during the period.

The Outlook

DeVry stock has seen a 35.7% year-to-date decline after posting consistently soft results in fiscal 2015. Higher growth investments in health care schools and declining enrollment levels at DeVry University due to weak demand have been eating into the company’s profits in the past three quarters.

DeVry expects these headwinds to affect first-quarter 2016 results as well. First-quarter fiscal 2016 revenues are expected to decrease year over year due to unfavorable translation of the Brazilian currency and weak revenues at DeVry University.

Moreover, the company’s new student-focused initiatives at DeVry University, which were aimed to transform the business and return it to profitability, do not seem to be paying off yet.

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Kevin Cook is a Senior Stock Strategist for Zacks where he runs the  more

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