We are downgrading DeVry Inc.'s (DV) stock from Neutral to Underperform on the back of sluggish first quarter 2012 earnings of $0.83, which missed the year-ago level as well as Zacks Consensus Estimate by 19.4% and 13.5% respectively. Deteriorating economic conditions and rising unemployment acted as catalysts for the slowdown of the company's growth.
In addition, about 123,000 students got enrolled across all the DeVry institutions which were marginally lower than the previous year. Lower enrollment in the fourth quarter 2011 in DeVry University, particularly in Carrington, lowered margins which compelled the company to tighten cost-control measures.
Management lowered its guidance for the fiscal year as it does not expect earnings to grow significantly in the near future. Moreover, compulsion of the company to comply with the strict regulations poses a threat to DeVry's operations.
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