GARP Research Drops Coverage on DeVry (DV); Fears Confirmed as Enrollments Continue to Deteriorate

GARP Research drops coverage on DeVry (NYSE: DV) from a Neutral rating.

GARP analyst, Rob Furlong, said, "We recommended DV in 2005 based on secular growth and a turnaround in its undergrad division. Since then, DU enrollment has doubled and DeVry’s BTM segment margin expanded well past its previous peak. With declining starts at DU, we think investors may be witnessing the new high water mark. The last time DeVry’s undergrad results turned south, BTM adjusted segment profit collapsed ~80% from peak to trough. In FY05, BTM generated less than 30% of consolidated pretax profit. In FY11, it yielded 73% of the corporate total ($494 million). A material portion of operating profit may be at risk if enrollment declines persist; we doubt DV’s growth engines (Chamberlain and DV Brasil) can make up for that over the next couple years. We also worry that regulatory tightening & negative headlines may be a red herring, stealing attention away from (not causing) an emerging broad-based downturn. First Carrington cracked, then DU turned south; and now growth at Keller has slowed to a halt."

"Were we to continue coverage, we would not necessarily consider changing our rating at this time. All figures in this note are up-todate as of the most recent quarterly results (4Q11)."

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