DeVry shares climb on restructuring efforts

DeVry shares climb 16 percent as analysts praise cost-cutting and restructuring efforts

Associated Press

WASHINGTON (AP) -- DeVry Inc.'s shares jumped Thursday after the struggling for-profit education company reported better-than-expected earnings and analysts praised the company's cost-cutting and restructuring efforts.

THE SPARK: Devry Inc. reported a sixth-straight quarter of declining revenue on Wednesday as fewer students enrolled in its classes. But the decline wasn't as bad as analysts had expected and there were signs of improvement in some student trends. Excluding one-time items, profit fell to 87 cents in the second quarter, but that was still far better than the average analyst estimate of 57 cents, per FactSet.

DeVry says it expects at least $80 million in cost cuts this fiscal year.

THE BIG PICTURE: DeVry and other for-profit education companies have struggled for more than a year with the impact of new government regulations and increased scrutiny from the media. Critics say the companies are providing poor education that doesn't translate into good jobs for graduates, are graduating too few students and burdening many with excessively high debt that they can't repay. Many of the education companies have tightened their admission standards in response, which has dented admissions and revenue. They've also started downsizing their operations as fewer students sign up.

THE ANALYSIS: Citi analyst James Samford said in a research note he is "encouraged by the progress that the company has made in its cost-cutting efforts," and notes that the company's medical and nursing programs continue to perform well. Samford states that the company's diverse mix of educational programs give it a stronger position than other for-profit education companies. Samford raised his price target for the stock to $31 from $24.

Stifel Nicolaus analyst Jerry Herman told investors, "DeVry's 'transition year' is generally progressing better than expected," and that the company is well positioned for mid and long-term growth. Herman holds a "buy" rating on the stock and raised his price target to $36 from $30.

SHARE ACTION: Company shares rose $4.18, or 16 percent, to $30.30 in afternoon trading.