DeVry Death Spiral: How the Analysts Got It So Wrong

DeVry, Inc. (NYSE: DV) is topping the leaderboard today, but in the wrong direction.  It is the top loser on the New York Stock Exchange.  The secondary education provider issued a rather ghastly earnings warning if you look at the stock reaction.  The company said that enrollment is falling and that it is firing some 570 workers as it struggles in a new regulatory environment.

The company said that enrollment for the summer term at its DeVry University is expected to fall by 15% to 17% from the 2011 term.  Its earnings warning is even worse: $0.43 to $0.46 versus estimates of $0.79 EPS. What is amazing is how so many analysts just this one wrong. It was obvious that things were bad in this sector, but THIS BAD???  We have seen at least four downgrades so far this Tuesday:

  • Cut to Neutral from Buy at BofA-Merrill Lynch
  • Cut to Neutral from Buy at Citigroup
  • Cut to Underweight from Neutral at J.P. Morgan
  • Cut to Perform from Outperform at Oppenheimer

Apollo Group Inc. (NASDAQ: APOL), which owns the University of Phoenix, is down 6% at $27.18 at a new 52-week low. Corinthian Colleges Inc. (NASDAQ: COCO) is down 4.4% at $2.34 but that is nowhere close to a 52-week low. Strayer Education Inc. (NASDAQ: STRA) is down 8% at $93.44.

DeVry shares are not just at a 52-week low.  They are at multi-year lows.  After a 24% drop to $20.85, its prior 52-week range was $26.13 to $66.08. DeVry shares are now trading at less than half the price from the peak of selling in early 2009 during the height of the recession.