DeVry Inc.’s fiscal first-quarter profit jumped 35% as revenue improved, helping results beat expectations, but the company warned of falling enrollment in its undergraduate programs.
DeVry and other for-profit colleges have faced scrutiny from the U.S. Department of Education and members of Congress in recent months as they capture a growing share of federal student aid dollars.
A number of schools are already changing admissions standards and recruiting practices ahead of new regulations expected from the Education Department. DeVry, which offers programs ranging from certificates in dental assisting to MBAs, said that while it is monitoring potential new regulations and may need some adjustments down the line, it is confident about its existing programs.
“We aren’t making large operational adjustments in anticipation of the new rules,” President and Chief Executive Daniel Hamburger said on a conference call with analysts. He said DeVry University isn’t an open-enrollment school and doesn’t pay incentives to recruiters based on enrollment. “We don’t anticipate major operational challenges and hurdles.”
Still, DeVry said Tuesday that it expects new-student enrollment at DeVry University, its largest school, to see a “modest decline” when it reports fall semester figures in December. New-student enrollments at Carrington College, which has many certificate and associate degree programs, are expected to decline in the mid single digits on a percentage basis.
DeVry cited difficult comparisons against the year-ago period and fewer admissions officers for the negative numbers. It said the uncertain economic environment, leading students to hesitate over taking on debt, may also be a factor.
A number of other schools, including Apollo Group Inc. (APOL), ITT Educational Services Inc. (ESI) and Capella Education Co. (CPLA), in recent weeks also have reported or projected new-student enrollment declines.
DeVry said it doesn’t see its declines as a long-term trend, since many of the factors are internal. It is hiring more recruiters and continues to publicize Carrington, a new name for two recently combined schools.
The company expects to report overall fall semester student enrollment growth at DeVry University in the mid-teens on a percentage basis. Total enrollment at Carrington is expected to decline by low single digits on a percentage basis, and the company said demand at Chamberlain College of Nursing remains strong.
For the quarter ended Sept. 30, DeVry posted earnings of $73.6 million, or $1.03 a share, up from $54.7 million, or 76 cents a share, a year earlier. Revenue grew 21% to $521.4 million.
Analysts’ average estimates were for earnings of 96 cents on revenue of $520 million, according to Thomson Reuters.
“We’re off to a good start and our first-quarter results put us in a good position to deliver our goal of roughly 20% earnings growth for fiscal 2011,” Chief Financial Officer Richard Gunst said on the call.
Total graduate enrollment, including at the Keller Graduate School of Management, climbed 14.1% to 23,389 for the September session. Growth at Keller is expected to be flat for the fall semester.
Ross University enrollment declined 0.7% to 4,567, as the company continued to moderate new-student enrollment until it adds capacity. The company expects enrollment to begin increasing again in 2011.
Shares of DeVry rose 1.2% to $43.25 in after-hours trading. The stock has lost a quarter of its value this year.
