U.S. for-profit education companies DeVry Inc. and Capella Education Co. warned of slowing enrollment growth in the face of an uncertain regulatory environment.
The industry has come under fire from regulators and the Obama administration — and faces possible tougher rules — for saddling students with big debts and not fully preparing them for jobs.
Capella expects revenue and enrollment to slow and said it was tightening student enrollment, knocking off a quarter of its market value and dragging other education stocks on Tuesday.
The company was considered one of the safer plays in the sector with its focus on the working-adult population, but its move to change enrollment policies signals no company is immune to the issues the industry is facing and all will feel the pinch of proposed tighter rules.
Bigger rival DeVry Inc (DV.N) reported better-than-expected first-quarter results late on Tuesday, but expects DeVry University to report a modest decline in new undergraduate student enrollments. [ID:nASA00W6Q]
However, unlike Capella, DeVry is not making any large operational changes in anticipation of the new rules.
“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 percent earnings growth for fiscal 2011,” DeVry CFO Rick Gunst said on a conference call with analysts.
DeVry shares rose 1 percent in extended trade to $43.25, after closing down 5 percent.
Capella’s Chief Executive Kevin Gilligan said from November, undergraduate students — about 20 percent of the company’s current total student population — without prior college experience will have to go through an assessment process before enrollment.
Sterne Agee & Leach analyst Arvind Bhatia said, “Everybody is going through the same issues. They are all finding it harder to get higher quality students.”
Quality students? Are you kidding? I used to teach courses at DeVry. Most of those students shuldn’t have graduated high school.