Barclays on U.S. Education Services: Additional Thoughts Post New GE Rules
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Price: $13.23 +0.15%
Rating Summary:
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Today's Overall Ratings:
Up: 18 | Down: 40 | New: 37
Rating Summary:
7 Buy, 17 Hold, 0 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 18 | Down: 40 | New: 37
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Barclays on U.S. Education Services: Additional Thoughts Post New GE Rules
Barclays analyst said, "Last week, the Department of Education (DoE) published the long-awaited final Gainful Employment (GE) regulations. While the basic framework from the drafted rules was maintained, we see the many changes as a clear positive as they should make compliance more achievable while providing more time for the industry to comply."
"In our view, the final (and more accommodative) GE rules significantly reduce
regulatory uncertainty. Despite rallying last week, the stocks remain at largely
depressed valuations, and could see further multiple expansion once the
fundamental outlook improves. The industry also remains very well capitalized, and we expect healthy cash flows even with expected earnings declines in '11/'12."
"While we acknowledge that many of the stocks price in a difficult environment, we see no positive fundamental catalysts and continue to believe consensus estimates are more likely to be revised downwards than upwards in the short term, though aggressive buybacks could lead estimates higher in some cases."
"We are raising our price targets to reduce the regulatory discount, and now see moderate upside potential in many of the stocks. DeVry (NYSE: DV) and Education Management (Nasdaq: EDMC) remain our top Education picks as we believe they provide the best mix of quality outcomes, program diversity and medium-term growth potential." (Barclays raises DV's price target from $57 to $71, EDMC's price target from $121 to $27, ITT Educational (NYSE: ESI) from $77 to $91 and Strayer (Nasdaq: STRA) from $121 to $125)
Barclays analyst said, "Last week, the Department of Education (DoE) published the long-awaited final Gainful Employment (GE) regulations. While the basic framework from the drafted rules was maintained, we see the many changes as a clear positive as they should make compliance more achievable while providing more time for the industry to comply."
"In our view, the final (and more accommodative) GE rules significantly reduce
regulatory uncertainty. Despite rallying last week, the stocks remain at largely
depressed valuations, and could see further multiple expansion once the
fundamental outlook improves. The industry also remains very well capitalized, and we expect healthy cash flows even with expected earnings declines in '11/'12."
"While we acknowledge that many of the stocks price in a difficult environment, we see no positive fundamental catalysts and continue to believe consensus estimates are more likely to be revised downwards than upwards in the short term, though aggressive buybacks could lead estimates higher in some cases."
"We are raising our price targets to reduce the regulatory discount, and now see moderate upside potential in many of the stocks. DeVry (NYSE: DV) and Education Management (Nasdaq: EDMC) remain our top Education picks as we believe they provide the best mix of quality outcomes, program diversity and medium-term growth potential." (Barclays raises DV's price target from $57 to $71, EDMC's price target from $121 to $27, ITT Educational (NYSE: ESI) from $77 to $91 and Strayer (Nasdaq: STRA) from $121 to $125)
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