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Bear of the Day

Devry (DV) was recently downgraded from Neutral to Underperform. The downgrade comes as the company reported dismal fourth quarter results.

Both top and bottom lines declined on a sequential as well as year over year basis. DeVry's fourth quarter 2012 earnings of $0.47 per share declined 56% from the year ago levels due to lower revenues and high operating costs. Net sales fell 7.5%, once again due to a decline in enrollment.

In July, DeVry had preannounced its guidance for the quarter, which was largely disappointing. The final reported results were mostly in line with the preannounced figures. DeVry's share price has gone down by more than 25% since the pre-announcement.

We have a long term Underperform recommendation on the stock. Our target price of $18.00 is based on approximately 9.5x our 2013 earnings estimate.

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