DeVry Education (DV) Beats On Q4 Earnings & Revenues

DeVry Education Group Inc. (NYSE:DV) reported robust fourth-quarter fiscal 2016 results, surpassing the Zacks Consensus Estimate for both sales and earnings per share, for the second quarter in a row.

Fourth-quarter 2016 adjusted earnings of 65 cents per share surpassed the Zacks Consensus Estimate of 61 cents by 6.6%. Earnings per share increased 14% year over year.

DeVry’s quarterly net sales of $471.7 million surpassed the Zacks Consensus Estimate of $463 million by 1.9%. Though sales decreased 0.3% year over year, the rate of revenue decline was much narrower than the company’s expectation of 2–3% decline.

The company’s total enrollment decreased 8.8% year over year in the fourth quarter, while new enrollment decreased 22.9%.

Adjusted operating income increased 10.8% during the quarter on the back of solid cost control.

Segment Details

Business, Technology and Management: This segment includes operations of the company’s largest subsidiary, DeVry University, which offers both graduate and undergraduate courses.

The segment recorded revenues of $135.0 million, down 23.4% year over year due to weak enrollment trends at DeVry University. Due to cost control initiatives adjusted operating loss of $0.7 million during the quarter was narrower than the operating loss of $1.9 million in the prior-year quarter. DeVry University reported $181 million in cost savings in fiscal 2016. The company expects additional cost savings in fiscal 2017.

For the May 2016 session, total enrollment and new enrollment of undergraduate students declined 23.3% and 21.9%, respectively. Total enrollment of graduate course takers, including the Keller Graduate School of Management, slumped 21.7%.

For the Jul 2016 session, total enrollment and new enrollment of undergraduate students declined 22.6% and 26.2%, respectively. Total enrollment of graduate course takers, including the Keller Graduate School of Management, slumped 19.4%.

DeVry University starts are undertaking several student-focused initiatives at DeVry University to return to growth and transform the business. However, these efforts do not seem to be paying off yet.

Medical and Healthcare: Medical and Healthcare is the company’s largest segment at present. It consists of DeVry Medical International, Chamberlain College of Nursing and Carrington College.

The segment reported revenues of $231.2 million, up 8% year over year, driven by strong enrollment at Chamberlain College of Nursing. Adjusted operating income was $37.9 million, up 21.5%.

At the Chamberlain College of Nursing, revenues escalated 17.8%. This increase was driven by solid demand for nurses with advanced degrees.

For the May 2016 session, total enrollment at Chamberlain surged 18.9%, while new enrollment soared 13.4%.

For the Jul 2016 session, total enrollment at Chamberlain surged 15.9%, while new enrollment declined 1.7%.

At DeVry Medical International, revenues increased 3.8% to $83.3 million during the fourth quarter of fiscal 2016. For the May 2016 session, total enrollment at DeVry Medical International declined 2.1%, while new enrollment dipped 13.3%.

At Carrington College, revenues were down 6.4% in the quarter. Total enrollment decreased 13.9% and new enrollments fell 39.3%.

International and Professional Education: The segment includes professional exam review and training operations of Becker Professional Review and DeVry Brasil.

The segment recorded revenues of $106.2 million, up 27.5% year over year, mostly driven by acquisitions and organic revenue. However, unfavorable Brazilian currency translations hurt revenues by $7 million. On a constant currency basis, revenues surged 36%. Adjusted operating income was $28.3 million, up 50.7% year over year.

DeVry Brasil’s revenues increased 42.8% year over year, driven by an increase in enrollment levels. On a constant currency basis, revenues escalated 57%.

Becker Professional Education revenues of $31.5 million were up 1.6% year over year.

Fiscal 2016

Fiscal 2016 adjusted earnings of $2.41 per share surpassed the Zacks Consensus Estimate of $2.36 by 2.1%. Earnings per share decreased 3.2% year over year.

DeVry’s fiscal 2016 net sales of $1.84 billion surpassed the Zacks Consensus Estimate of $1.83 billion by 0.6%. Sales decreased 3.5% year over year.

First-Quarter Fiscal 2017 Outlook

For the first quarter of fiscal 2017, the company expects revenues to increase in the range of 1–2% year over year. Adjusted operating costs are expected to increase less than 1%.

Fiscal 2017 Outlook

For fiscal 2017, the company expects revenues to be flat year over year. Adjusted earnings per share are expected to increase in the mid-single digit range. Capital spending is expected to be around $80 million. Adjusted effective income tax rate for 2017 is expected to be about 23%.

DeVry Education Group currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the education industry include New Oriental Education & Technology Group Inc. (NYSE:EDU) , Lincoln Educational Services Corporation (NASDAQ:LINC) and ITT Educational Services Inc. (NYSE:ESI) . While Lincoln Educational Services and ITT Educational Services sports a Zacks Rank #1 (Strong Buy), New Oriental Education & Technology Group has a Zacks Rank #2 (Buy).