We expect the leading private education service provider,
Apollo Group Inc.
), to beat expectations when it reports fiscal fourth-quarter and
full year 2013 results on Oct 22.
Why a Likely Positive Surprise?
Our proven model shows that Apollo is likely to beat earnings
because it has the right combination of two key ingredients.
Positive Zacks ESP:
Expected Surprise Prediction or ESP (Read:
), which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, stands at 20.0%. This
is very meaningful and a leading indicator of a likely positive
Apollo carries a Zacks Rank #3 (Hold).Note that stocks with Zacks
Ranks of #1, 2 or 3 have a significantly higher chance of beating
earnings. The Sell-rated stocks (#4 and 5) should never be
considered going into an earnings announcement.
The combination of Apollo's Zacks Rank #3 (Hold) and +20.0%
ESP makes us very confident about a positive earnings beat on Oct
What is Driving the Better-Than-Expected Earnings?
Solid cost control initiatives are expected to make up for the
sluggish enrollment trends to lead to a positive earnings
surprise in the upcoming quarter. Education companies like
Strayer Education Inc.
) and others have been witnessing weak enrollment trends in the
past quarters. Sluggish new enrollment growth has been affected
by the changing regulatory requirements, sluggish demand due to
students' aversion to debt, robust competition and a volatile
economy. However, Apollo's accelerated efforts to right-size its
business through significant layoffs and campus closings will
make it more competitive in the long term.
Moreover, investments in adaptive learning, curriculum
development, new learning systems and studentservice platforms
should improve student value proposition and retention rates;
thereby boosting enrollments.
In July, the Higher Learning Commission (HLC) reaffirmed the
accreditation for Apollo Group's flagship university, University
of Phoenix, for a ten-year period. The University accounts for
more than 90% of Apollo's revenues and the renewal cleared a
major overhang for Apollo.
Other Stocks to Consider
Here are some other schools that can be considered as our
model shows that they have the right combination of elements to
post an earnings beat this quarter:
), with Earnings ESP of +4.35% and a Zacks Rank #1 (Strong
ITT Educational Services Inc.
), with Earnings ESP of +5.56% and a Zacks Rank #3 (Hold).
APOLLO GROUP (APOL): Free Stock Analysis
DEVRY INC (DV): Free Stock Analysis Report
ITT EDUCATIONAL (ESI): Free Stock Analysis
STRAYER EDUC (STRA): Free Stock Analysis
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