DeVry’s profit soars 69 percent higher in second quarter

DeVry's stock price rose 13 percent today, after second quarter earnings beat analyst's expectations.

by Anjana Sundaram
January 27, 2010

DeVry Inc., a global for-profit provider of educational services, reported a sharp increase in profit during its second-quarter, handily beating Wall Street expectations.

DeVry’s profit increased 69 percent compared with the second quarter last year. DeVry earned a hefty $72.5 million, or $1.00 per diluted share, in the period ended Dec. 31, up from $42.9 million, or 59 cents per diluted share a year earlier. The positive results were attributed to growth in enrollment and retention in the schools DeVry operates. 

Analysts surveyed by Zack’s Investment Research Inc. projected earnings per share would come in at 83 cents for the current quarter.

Sales also rose from $370 million to a record $473 million, a 28 percent increase from the year-earlier quarter. The strong sales were attributed to acquisitions made during the past year. The sales from the business, technology and management segment, which comprise nearly 66 percent of total revenue, rose by 26 percent compared to the year-earlier quarter. The medical and healthcare segment, which comprises about a quarter of total revenue, increased by 28.4 percent in the same period. However, the sales from the professional education segment, which comprise only 4 percent of total revenue decreased 6.3 percent compared to the year-earlier quarter.

“Earnings per share were $1 in the quarter, marking the first time we’ve broken through the dollar threshold,” Rick Gunst, chief financial officer said Tuesday in the conference call. Of DeVry’s record sales, he said, “This is primarily organic growth.”

CEO Daniel Hamburger announced that DeVry plans to invest more than $100 million this year in capital expenditures for program services and facilities to aid long-term growth. DeVry’s long-term financial objective is to grow earnings by roughly 20 percent per year. “Our strong first half performance puts us in a position to exceed this goal as we believe earnings will continue to grow in excess of 20 percent over the balance of this fiscal year,” Gunst said.

“We always expected DeVry to see significant improvement in its profitability, especially for the BT&M [Business, Technology and Management] segment,” said Morningstar Inc. analyst Todd Young in an analyst’s report released Wednesday.  But he added, “We did not anticipate seeing this level of improvement so quickly, and our margin forecasts look too conservative in light of recent results.”

Analysts’ third-quarter earnings estimate is 93 cents per diluted share and $3.23 for all of 2010.

Earnings for the first half ended Dec. 31 increased by 64 percent to $904 million, from $673 million in the same six-month period last year. Diluted earnings per share rose from $1.07 to $1.76.

Six-month revenues increased by 34 percent, from $673 million to $904 million compared with the same period last year.

DeVry shares rose 13 percent, closing at $63.32, up $7.15.

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