DeVry earnings release surprises

By Chelsea Wallis
April 27, 2011 – Medill News Service, Chicago

DeVry Inc. profit increased 14.5 percent because of investment in new locations, topping the estimate by securities analysts. The stock rose.

Net income of the for-profit education company in its third quarter ended March 31 was $92.9 million, or and $1.32 per diluted share, compared with $81.2 million, or $1.12 per share, in the year-earlier quarter.

The consensus earnings estimate by analysts was $1.23 per share.

Jeff Silber of BMO Capital Markets called the growth an “upside surprise,” as the expansion of Chamberlain College of Nursing and entry into the Brazilian market caused earnings to exceed analyst expectations.

Quarterly revenues were up to $562.7 million compared with year-ago revenues of $504.4 million, an increase of 11.6 percent.

The Chamberlain and Brazil upturns mitigated soft new-student enrollment numbers for certificate and associates degrees.

“With the increased demand we’re seeing for skilled nurses, we’ve invested in the infrastructure and the management team to do more,” said DeVry CEO Daniel Hamburger in a conference call. The company increased its target of opening Chamberlain Colleges from one to two per year to two to three per year.

In DeVry Brasil’s third year, enrollments significantly outpaced the Brazilian market, Hamburger said.

Analysts are reacting positively to Devry’s priorities of academic quality and diversification because profitability exceeded expectations, said Robert Craig of Stifel Nicolaus and Co. Inc.

But some potential risks, said Craig, include negative publicity about for-profit colleges and the improving job market.

Hamburger said the company’s biggest challenge is stemming declining enrollments in shorter programs such as those of Carrington Colleges, which offer certificate and associate degrees.

Earnings for the nine months ended March 31 were $255.2 million, or $3.60 per diluted share, compared with $208.3 million, or $2.88 per share, in the year-earlier period. Revenues rose to $1.64 billion from $1.41 billion.

The stock closed at $50.09 Tuesday, up $1.06 or 2.16 percent.

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