Analysts Still Hesitant about Career Education Corp

Article excerpt

Byline: Katherine Glover Medill News Service

Its stock has recovered a bit since the troubled Career Education Corp. announced in September its CEO was stepping down, but analysts are still lukewarm on the international provider of higher education.

"With the company acknowledging that it could take up to six months to hire the right candidate, the risk is the company doesn't take aggressive actions until they have a new CEO on board," said Gary Bisbee of Lehman Brothers Inc.

Of 17 analysts tallied by Bloomberg News, only one recommends buying the stock of the Hoffman Estates-based company, while 12 said hold and four recommended selling.

Ivan Feinseth, director of research at Matrix USA in New York, who rates it a buy, said he looks only at profit and value when rating companies, and not management issues. "They still have a strong return on capital and we think the stock is cheap," he said. But Jeffrey Silber of BMO Capital Markets said although Career Education has made a lot of progress, "things are probably going to get worse before they get better."

Silber said new student enrollment has declined for the past two quarters, meaning as current students graduate, total enrollment will continue to fall.

Career Education reported a total of 84,700 students at its more than 80 campuses in five countries as of July 31, compared with 92,000 students as of July 31, 2005.

"Our view is: it's not going to get better overnight," Bisbee said. He downgraded the stock on Sept. 27 - two days after the change in management - lowering the stock's target price from $24 to $21.

The stock has been trading around $22, well above its 52-week low of $17. …