Citi Gives Earnings Preview On DeVry

DeVry DV will report 3Q results today, April 26th and Citi looking for Rev of $569MM slightly above street of $564 and in-line EPS of $1.25. Citi expects DV to maintain its FY 11 Operating Profit growth outlook of 20% Y/Y. There is growing skepticism that DV can deliver profit growth in 2012, and considering that Street EPS expectations for APOL and ESI have already been negatively reset with little impact to their share prices, Citi would be unsurprised if a modestly negative "back to flat" 2012 EPS revision actually turned out to be a positive catalyst for the shares. Citi expects 13% Y/Y increase in Q3 Rev, with decel driven by roughly 11% Y/Y decline in new starts. Citi is anticipating a 40 bps Y-Y decline in op margins to 24%, with investments in Student Services and mix shift to structurally lower margin programs. While trends are generally negative, Citi still views DV as the most attractive asset among the traditional For Profit schools because of its diversification and attractive trends in Nursing and CPA/CFA exam prep programs. Citi also believes traditional college capacity constraints, budget shortfalls, and tuition hikes could push more traditional students DV's way. Citi has a $64 PT and Buy rating on DV DV closed Monday at $49.03