Summer's almost gone, and with it, DeVry's
What analysts say:
- Buy, sell, or waffle? Eighteen analysts follow DeVry, with seven rating the stock a buy, and the rest calling it a hold.
- Revenue. On average, the analysts expect to see 12% sales growth to $241.5 million.
- Earnings. Profits are predicted to rocket 47% to $0.25 per share.
What management says:
DeVry has been on a tear so far this year, with low sales gains transforming into a near-doubling of the profits earned during the first three quarters of the previous fiscal year. The bottom line mainly benefited from management's efforts to trim its payroll costs. CEO Daniel Hamburger intends to keep the cost cuts coming, since he believes the new cost structure will restore margins to their previous health.
In our April Foolish Forecast, we described DeVry's offer as an early retirement program aimed at reducing the firm's complement of campus-based educators, even as the firm expands in the lucrative field of online education. No sooner had we done so, though, than DeVry made the "difficult decision" to make its voluntary separation program compulsory for "145 employees at DeVry University campuses." DeVry expects to report $2.6 million in charges for severance on Monday -- but to save itself about $10 million in wages and benefits every year thereafter.
What management does:
Needless to say, the math looks good for investors (though no so good for the luckless employees). I'd expect that while we may see a hit to net margins on Monday as the charges come home to roost, the layoffs will keep DeVry's gross and operating margins on their steady upward rise.
12/05 |
3/06 |
6/06 |
9/06 |
12/06 |
3/07 |
|
---|---|---|---|---|---|---|
Gross |
45.9% |
46.2% |
46.3% |
46.7% |
47.3% |
47.7% |
Operating |
7.8% |
8.1% |
8.1% |
8.4% |
8.9% |
9.4% |
Net |
3.3% |
3.8% |
5.1% |
6.9% |
7.3% |
7.9% |
One Fool says:
Why is DeVry signing severance checks for campus-based employees with one hand, while signing employment contracts for online educators with the other? Two reasons: First, as we've seen in past reports from DeVry's competitors, for-profit educators such as Apollo
What's the Foolish consensus on DeVry? Find out in:
Fool contributor Rich Smith does not own shares of any company named above. The Fool's disclosure policy lets everyone copy off its notes.