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Adtalem to Transfer Carrington College to San Joaquin Valley

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Adtalem Global Education (ATGE - Free Report) has entered into an agreement to transfer complete ownership of Carrington College to a family-owned, California-based career college — San Joaquin Valley College, Inc.

Carrington College will operate as a separate institution, maintaining the Carrington College name, under San Joaquin Valley College. No consideration will be paid to Adtalem at the closing of the transaction and Adtalem will provide Carrington with sufficient working capital to operate efficiently. The transaction is expected to be completed in the mid-year fiscal 2019 and is subject to certain terms and conditions during the transition.

With Carrington’s 19 locations spread across the West Coast as well as Southwest regions and San Joaquin Valley’s 15 campuses throughout California, these institutions are expected to serve students better. San Joaquin Valley College and Carrington College complement each other in size, campus locations and program offerings. Carrington offers certificate and associate degree programs in allied health fields while San Joaquin Valley offers more than 20 certificate and associate of science degree programs.

Notably, Carrington’s revenues fell 11.4% in fiscal year 2017 compared with the prior-year’s tally, thanks to declining enrollment. The downside was caused by changing demand for career education, considering low unemployment and rising wages. Combined new student enrollment at the end of fiscal 2017 fell 13.8% and average total enrollment declined 15.8% compared from the prior-year’s tally.

To improve enrollment results, management focused on introducing relevant programs but that did not manage to increase enrollments. New student enrollment at Carrington was down 5.2% and total student enrollment declined 8% at the end of the third quarter of fiscal 2018.

Meanwhile, this is not the first time Adtalem is transferring ownership of its institutions. In December 2017, the institution entered into an agreement to transfer ownership of DeVry University and Keller Graduate School of Management to Cogswell Education LLC, a California-based higher education company. DeVry University, which accounts for a major portion of its revenues, has also been witnessing a persistent decline in enrollments at its flagship institution.

DeVry University student starts have been declining for several years and are expected to pose worries in the near term, as students are still reluctant to incur debt for higher degree. Nevertheless, the company has undertaken several student-focused initiatives at DeVry University to return to growth and transform business. However, these efforts went in vain.

With the transfer of Carrington and DeVry University, Adtalem will be able to pay better attention on remaining institutions across the medical and healthcare, technology and business as well as professional education segments.

Price Performance

Adtalem’s shares have gained 14.4% year to date compared with 4% rally of the industry. However, the current year and next year earnings estimates have moved down 0.7% and 2.5%, respectively, over the past two months. This reflects analysts’ concerns over the stock’s earnings prospects.



 

Zacks Rank & Stocks to Consider

Adtalem presently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the industry are Career Education Corp. (CECO - Free Report) , New Oriental Education & Technology Group (EDU - Free Report) and Grand Canyon Education (LOPE - Free Report) .

All three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fiscal 2018 earnings for Career Education are expected to surge 206.5%.

New Oriental Education & Technology is expected to witness 16.6% growth in fiscal 2018 earnings.

Grand Canyon is likely to see a 21.9% rise in 2018 earnings.

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