Career Education Corp. (NASDAQ:CECO) Gets Upgraded
Trace A. Urdan, equity research analyst at Wells Fargo Securities upgraded Career Education Corp. (NASDAQ:CECO)’s rating from ‘Market Perform’ to ‘Outperform’, in a report released on Friday, October 25, 2013. The analysts noted in the report that the upgrade is in reference to anticipated $276.5 million the Career Education expects to receive from the sale of its European assets. With the expected cash infusion, Wells Fargo raised its price target for the shares of Career Education from $2.50-$4.80 to $5-$7. During Friday’s trade, following the announcement, the stock gained 57.37% to end the trade at $5.98.
Analyst at Wells Fargo earlier estimated Career Education’s European assets at $106 to $127 million for its entire international schools business including INSEEC Group and the International University of Monaco. The company originally paid the price of 5.7x EBITDA for INSEEC. The recent price to be paid by Apax Partners, the private equity acquirer for Career Education’s European assets, is estimated to be around 13.1x FY13’s estimated EBITDA. Moreover the analysts clarified that the revised analysis does not take into consideration any savings in overhead cost though they expect some benefit in overhead cost as well.
The company mentioned to use the proceeds from European sales to grow its business in the U.S. to best serve the vast majority of students who are part or prospects for Career Education’s US institutions. Moreover the proceeds are expected to act as shield against battling losses as well as falling student enrollment in the $25 billion U.S. education industry. However, Apollo Group Inc. (NASDAQ:APOL), the University of Phoenix owner, informed this week that the fall in student enrollment rate has been declined during the quarter ended Sept. 30.
Morgan Stanley & Co (NYSE:MS) acted as an exclusive financial adviser in Career Education’s European deal.
During last November, Career Education announced to shut 23 campuses (from total 90 campuses) due to losses and falling enrollments.