Education Management Ups Share Buyback
(For-profit education stock report updated with broker action.)
PITTSBURGH (
) --
Education Management
(EDMC)
said Friday it increased the size of its stock repurchase program.
|
Education Management, a
for-profit postsecondary education provider, said its board approved a 300% increase to the size of its stock buyback initiative, from $50 million to $150 million, and extended the term of the program to Dec. 31, 2011.
>>School Stocks Slammed By Report
Education Management launched the stock repurchase program on June 11 and has repurchased 4.2 million shares to date at a cost of $50 million, the company reported.
On Thursday, analysts from
Goldman Sachs
(GS) - Get Report
lowered their earnings expectations for Education Management. The equity research firm maintained a neutral rating on the stock and $12.50 price target.
A number of for-profit education companies have been taking advantage of the recent pressure on their stock prices.
DeVry
(DV)
used cash reserves of $32.3 million, $43.7 million and $17.4 million during fiscal 2008, 2009 and 2010, respectively, for share buybacks and payment of dividends.
Career Education Management
(CECO) - Get Report
increased its share buyback program recently, establishing an $80 million 10b5-1 plan, adding to an existing $290 million authorization.
A purchase of the entire amount near its current stock price would add one-third to BMO Capital Markets analyst Jeffrey Silber's 2011 earnings-per-share estimates, he noted. Even so, Silber maintained a market perform rating on the stock.
>>School Stocks Brace for New Regulations
Corinthian Colleges
(COCO)
said over the summer its board approved a stock repurchase program under which it may purchase up to $200 million of its common stock.
Corinthian said its board approved the stock buyback plan on the belief that its valuation at the time provided for an attractive return on investment. Corinthian had not repurchased any shares of its common stock during the previous 12 months.
For-profit schools traded sharply lower over the summer when the U.S. government proposed regulations that were seen as hurting the industry's booming earnings growth. The Obama administration argued that for-profit schools like
Apollo Group
(APOL)
,
Everest colleges parent
Corinthian Colleges
,
Strayer Education
(STRA) - Get Report
and a number of their peers saddle their students with debt yet leave them unequipped for the job market and a means with which to repay the hefty loans.
>>School Stocks Fall on Enrollment Outlook
Worries were amplified after data showed nearly two-thirds of for-profit colleges' students were not repaying their loans. Repayment rates at for-profit schools were just 36% in fiscal 2009, according to research from the Institute for College Access and Success, a student-advocacy group. At private nonprofit schools the repayment rate was 56%, and at state colleges and universities the rate was 54%.
Arguably the most controversial of the proposed regulations, known as the "gainful employment" rule, would cut federal aid to schools where less than 45% of students are able to repay their loans.
The gainful employment rule will be issued early next year. It will consist of a two-part measurement to determine a program's eligibility to receive federal student aid. The measurement is based on loan repayment rates and debt-to-income ratios, and requires a minimum of four years of repayment history and three years of employment history.
The Higher Education Act of 1965 requires that programs in need of federal aid must provide their students "gainful employment in a recognized profession."
Education Management shares traded 0.9% lower to $13.84 on Friday afternoon. Devry gained 0.3%, Career Education 2%, Corinthian 0.7%, Apollo 0.3% and Strayer 3.7%.
-- Written by Miriam Marcus Reimer in New York.
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