Jefferies downgraded Corinthian Colleges (COCO), Career Education (CECO), and ITT Educational Services (ESI) to underperform from buy. The firm also downgraded Education Management (EDMC), Strayer Education (STRA), and Universal Technical Institute (UTI) to hold from buy.
Analyst Richard Close says additional news of financial-aid violations at Corinthian on the back of other recent investigations and legal woes reflects heightened levels of headline risks for these stocks in the post-secondary industry.
Close says he doesn't believe there's widespread fraud occurring throughout the industry. However, he thinks the current state of events (government investigations, and shareholder and student lawsuits) could overshadow any positive financial performances in this group.