It has been a long debate in the value world, whether for profit education are value stocks or value traps. Some have noted that Devry seems to be the best of the bunch. Yesterday, Devry reported earnings per share of $0.49, and revenue of $483MM, which many investors viewed as a positive sign.
Enrollment trends improved in the Medical segment, and DeVry Inc. (NYSE:DV) University reported “less bad” trends. While not willing to “call the turn” yet, management was notably upbeat about the progress that was made this quarter, particularly on the cost cutting side where the task force exceeded internal expectations and DeVry Inc. (NYSE:DV) is now on track to deliver $70MM in lower run rate costs by year end.
Carrington And Chamberlain New Starts Rebound Nicely
With 53% Y/Y increase in new starts at Chamberlain and 33% Y/Y growth in new starts at Carrington, DV is clearly making progress and taking share, relative to some of its peers. Aided by cost cutting efforts, the Medical and Healthcare segment posted better than expected operating margins, and actually expanded 10 bps Y/Y to 15.9%, the first Y/Y margin expansion in over 3 years.
DeVry University New Enrollment Was Indeed “Less Bad” — Undergraduate new enrollment at DeVry University declined roughly 9% Y/Y, a significant improvement vs. the 17% decline reported last quarter. Operating income came in better than expected, but fundamentals remain relatively weak, with operating margins down 920 bps Y-Y and Business, Tech, and Management revenues declining nearly 16% Y/Y. Management noted that that the company has been using scholarships to good success, which is driving improving conversion rates.
The company bought back 1.1mm shares for about $26 million ($23 per share). Their balance sheet still healthy: cash of $250 million (about $3.80 per share) and no debt.
Daniel Hamburger – DeVry Inc. (NYSE:DV)- President, CEO on the conference call, had some interesting remarks on the for profit education system in America, he notes.
Higher education is shrinking for the first time in at least 15 years. Now, that’s all of higher ed — public sector, private sector, and independent taken together.
Some people are questioning the value of a college education. This was the cover story of Newsweek a few weeks ago. Is college a lousy investment? And of course, not to be outdone, Time then had to put out a special report with basically the same theme.
In the current economy, with high unemployment having dragged on for four years, it’s understandable. But we all know that, in the long run, of course college is worth it. If you get a chance to talk to the author of one of these stories, simply ask them, which of your children will you advise not to go to college?
Now for career-oriented education, ROI, the return on investment; or the ROEI — return on educational investment, I should say — is even higher. The US Census Bureau recently released a report showing that the difference in lifetime earnings between a high school graduate and a college graduate is $1 million. And the difference is even greater for graduates in fields like engineering, computer science, and business. And of course accountants and nurses, doctors, and ancillary care professionals will have enormous employment opportunities in the coming years.
DeVry’s programs, across all our institutions, are focused on these types of high-ROI programs — or high-ROEI programs. And this is why DeVry is so confident about the future. The new DeVry University employment statistic we announced today shows that 86% of DeVry University graduates were active in the job market; were employed in their field of study within six months of graduation. Average salary — $42,623. Now, that’s remarkable in this economy. It demonstrates the quality of our academic offerings, and the return on investment for our students. And we’re actively enhancing our differentiated, career-oriented value proposition. For example, we’re expanding our partnership with CareerBuilder.
This provides Keller graduates with career services, including access to a personal career coach. Now, as the economy recovers, we believe we could see a release of the pent-up demand from people who are choosing to wait — putting off pursuing a degree until they feel the economy improves. When that time comes, DeVry’s family of institutions is well-positioned to help those students achieve their goals.
Citigroup has raised its price target on the stock to $24 a share. Shares of DeVry Inc. (NYSE:DV) are currently up 23%, to $25.53 on the earnings.
Disclosure: No position