Apollo Education Group, Inc.
) is set to report second-quarter fiscal 2014 results on April 1,
before the market opens. Last quarter, it delivered a positive
earnings surprise of 15.6%. Let's see how things are shaping up
for this announcement.
Factors to Consider this Quarter
Prudent cost management is helping Apollo beat earnings
expectations quarter after quarter despite weak revenues and
enrollment trends. The post-secondary education provider's
accelerated efforts to right-size its business through
significant layoffs and campus closings are lowering the
Notwithstanding weak top line and declining enrollment trends,
the company raised the revenue, operating income and cost savings
targets for 2014 at the first-quarter conference call. In fact,
management expects enrollment trends to improve throughout 2014.
We believe lower costs should boost profits for Apollo Education
in the second quarter as well.
Apollo Education's enrollments have been sluggish for several
quarters due to regulatory challenges, changes and competition in
the higher education industry. Enrollment trends throughout the
education industry have been affected by changing regulatory
requirements, sluggish demand due to students' aversion to debt,
robust competition and a volatile economy. Other education
DeVry Education Group Inc.
) and ITT Educational Services have also witnessed sluggish
enrollment trends for many quarters.
Apollo is investing in adaptive learning, curriculum
development and new learning systems/student service platforms,
which, coupled with the recent price cuts should improve student
value proposition and retention rates. We expect these turnaround
efforts to improve enrollment trends and boost margins in the
Our proven model does not conclusively show that Apollo
Education is likely to beat earnings this quarter. That is
because a stock needs to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here, as you will see below.
The Earnings ESP is -27.78%.
Apollo Education's Zacks Rank #1 (Strong Buy) when combined with
a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks that have both a positive Earnings ESP and a
favorable Zacks Rank are:
TAL Education Group
), with Earnings ESP of +6.25% and a Zacks Rank #3 (Hold).
Coca Cola Enterprises, Inc.
),withEarnings ESP of +2.27% and a Zacks Rank #2 (Buy).
APOLLO GROUP (APOL): Free Stock Analysis
COCA-COLA ENTRP (CCE): Free Stock Analysis
DEVRY EDUCATION (DV): Free Stock Analysis
TAL EDUCATN-ADR (XRS): Free Stock Analysis
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