DeVry (NYSE:DV), the erstwhile problem child of the for-profit education industry, has been turning in good report cards lately. In fact, the firm hasn't missed an earnings target in two quarters (fiscal or academic -- take your pick). Can DeVry keep the streak alive when it reports its Q3 2007 numbers Thursday afternoon?

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts now follow DeVry, down two from last quarter. Four of them rate the stock a buy, 12 more a hold, and one a sell.
  • Revenues. On average, the analysts expect to see 11% sales growth, to $244.8 million.
  • Earnings. Profits are predicted to rocket 32% to $0.29 per share.

What management says:
DeVry's ongoing effort to streamline its operations and shore up its profitability resulted in a "voluntary separation" offer to employees this quarter -- essentially, an early retirement proposal. Although it gave few details on the offer, DeVry expects to incur between $3 million and $4 million in severance and related charges in the second half of fiscal 2007. The company implied that management would prefer to shoo away campus-based employees, while retaining and perhaps even expanding its workforce in the faster-growing businesses of online education and educational centers. 

What management does:
No need to worry much about the severance charges. Although they're likely to bite into DeVry's net in the short term, the company has become solidly profitable in recent quarters; it can absorb the hit. At all levels -- gross, operating, and net -- its margins have been growing steadily over the last 18 months. What's more, by reducing payroll costs, I wouldn't be surprised to see DeVry improve its operating margins even further this quarter and next.

Margin

9/05

12/05

3/06

6/06

9/06

12/06

Gross

45.4%

45.9%

46.2%

46.3%

46.7%

47.3%

Operating

7.4%

7.8%

8.1%

8.1%

8.4%

8.9%

Net

2.6%

3.3%

3.8%

5.1%

6.9%

7.3%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
In a more ominous announcement than its workforce reduction, DeVry disclosed this quarter that the attorney general's offices of both New York and Illinois have requested information on its student lender practices. This suggests that DeVry is now part of a growing nationwide inquiry into colleges receiving kickbacks for referring students to "preferred lenders" who service their educational financial aid loans. DeVry may not be entirely blameless here; it confessed to receiving $88,122 in "revenue sharing fees" from one of its nine preferred lenders, Citigroup (NYSE:C).

Within less than a week, DeVry promised to disgorge $88,122 to student borrowers and signed on to a new College Code of Conduct, drafted by the New York attorney general, "to ensure best practices in student lending." If that's the end of the matter, all's well and good. Let's just hope there aren't other suspicious payments DeVry has yet to uncover. 

Speaking of which, we'll have something to look forward to as DeVry's peers report their own earnings news this quarter. Will ITT (NYSE:ESI) report similar news tomorrow? How about Corinthian (NASDAQ:COCO) and Career Education (NASDAQ:CECO) next month? Stay tuned.

Why do we call DeVry a problem child? Read for yourself:

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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.