DeVry Inc., the second-largest for- profit education company in the U.S. by market value, said profit rose 22 percent in the fiscal second quarter as students sought nursing and accounting degrees.
Net income for the three months ended Dec. 31 climbed to $88.7 million, or $1.25 a share, from $72.5 million, or $1 a share in the period a year earlier, the Downers Grove, Illinois- based company said today in a statement. That beat the average estimate of $1.19 a share of 19 analysts surveyed by Bloomberg.
For-profit university revenue is being threatened by slowing growth of new students as the U.S. Department of Education restricts recruiting practices and proposes changes to the use of federal funds. New student enrollment declined 4.7 percent to 17,983 for the fall of 2010, DeVry said in a December statement. DeVry may be dragged down by the issues facing other for-profit education companies, said Peter Appert, an analyst at Piper Jaffray & Co. in San Francisco, who has a “neutral” rating on the shares.
“DeVry is perceived as a high-quality operator, but the whole sector has been negatively impacted,” Appert said in a telephone interview before the earnings were released. “Everybody is subject to substantially increased scrutiny at this point because of the broad-based negative press the industry has received.”
DeVry fell 83 cents or 1.7 percent, to $47.38 at 4:04 p.m. in New York Stock Exchange composite trading. The shares fell 16 percent in the past 12 months compared with a 26 percent decline in a Bloomberg index of 13 publicly traded higher education stocks.
DeVry’s chairman is Harold Shapiro, an economist who was president of Princeton University in Princeton, New Jersey, from 1988 to 2001. Shapiro was also president of the University of Michigan, in Ann Arbor, from 1980 to 1988.
The company operates nine schools, including a medical school and an online K-12 school. Its largest unit, DeVry University, has more than 90 locations in the U.S. and Canada as well as online.
Second-quarter revenue rose 17 percent to $551 million from $473 million a year earlier, DeVry said.
U.S. Senate hearings held last year featured testimony that students are lured into programs that leave them with federal loans they can’t repay. President Barack Obama’s administration is proposing to restrict taxpayer funding to for-profit colleges, which rely on federal aid for up to 90 percent of their revenue.
DeVry’s enrollment growth is slowing because of the increased scrutiny on for-profit schools and because the improving economy means fewer students feel the need for more education, Appert said.
“Growth rates are normalizing,” Appert said. “It’s not just the negative publicity. The growth rates would be slowing no matter what.”
While the number of new students at DeVry University declined for the fall semester, total undergraduate enrollment rose 15 percent from the year earlier, to 73,543 students, the company reported in its December statement.
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