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DeVry Board Approves $100mn Buyback

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For-profit education company DeVry, Inc. recently announced that its board of directors has authorized a new $100 million share repurchase program. The board authorized DeVry to repurchase up to $100 million shares through the end of 2014. The buyback will be carried out using the available cash or borrowings.

The new plan will be DeVry’s eighth share repurchase program, which is schedule to be effective after the completion of the existing buyback program.

Also recently, DeVry announced plans of restructuring its board of directors. The company nominated Dr. Alan G. Merten for the director’s post, replacing the current board member Julia A. McGee. The latter informed the Board about her unwillingness to contest for re-election once her current term expires. The board will recommend shareholders to vote for Merten at the upcoming annual general meeting of shareholders in early November.

Our Recommendation

We currently have an Underperform recommendation on DeVry. The stock carries a Zacks #5 Rank (a short-term ‘Strong Sell’ rating).

DeVry’s fourth quarter performance was dismal. Both top and bottom lines declined on a sequential as well as year-over-year basis. DeVry’s fourth quarter 2012 earnings of 47 cents per share declined 56% from the prior-year quarter due to lower revenues and high operating costs. Net sales fell 7.5%, once again due to a decline in enrollment.

DeVry has been witnessing persistent enrollment declines as a result of overall economic downturn and lack of student confidence. In July, DeVry had pre-announced its guidance for the quarter, which was largely disappointing. The final reported results were almost in line with the pre-announced figures.  A difficult regulatory environment and intense competition also create significant overhangs. We thus believe that though management is trying to boost its business and control costs, it might take time for these initiatives to deliver the desired results.

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