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Will Apollo Education (APOL) Surprise Earnings in Q4?

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Apollo Education Group, Inc.APOL is set to report fourth-quarter and full-year fiscal 2015 results on Oct 22 before the market opens. Last quarter, it posted a positive surprise of 12.77%. The company has beaten earnings estimates in all of the past four quarters with an average beat of 20.88%. Let's see how things are shaping up for this announcement.

Factors to Consider

Based on business trends witnessed in the third quarter of fiscal 2015, and lower retention rates and enrollment trends expected in the to-be-reported quarter, Apollo Education cut its revenue and adjusted operating income guidance for fiscal 2015 for the third time this year during the third quarter 2015 earnings conference in June 2015.

Management expects fiscal 2015 revenues in the range of $2.60 billion to $2.62 billion much lower than the fiscal 2014 level. Adjusted operating income is expected to range between $190 million to $200 million.

Nonetheless, Apollo Education continues to perform well in the international market, which supports the company's revenues. Currently, Apollo Global, segment which invests in international education market has institutions across six continents. All of the international colleges at Apollo Global have shown significant progress in 2014 and so far in 2015. Management is confident that Apollo Global will achieve breakeven cash flow by fiscal 2015.

Management expects Apollo Global to constitute a larger share of its portfolio over the next five years. Also its medical programs have been witnessing increasing demand and are expected to continue to drive the top line in the near term.

Earnings Whisper?

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 Earnings ESP and a Zacks Rank of #1, #2 or #3 for this to happen. However, that is not the case here as you will see below.

Zacks ESP: The Earnings ESP is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 18 cents.

Zacks Rank: Apollo Education carries a Zacks Rank #3 (Hold). Though the company's Zacks Rank #3 (Hold) increases the predictive power of ESP, Apollo Education' ESP of 0.00% makes a surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some other companies in the consumer discretionary sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Boyd Gaming Corp. BYD , Earnings ESP of +20.00% and a Zacks Rank #1 (Strong Buy).

Norwegian Cruise Line Holdings Ltd. NCLH , Earnings ESP of +1.48% and a Zacks Rank #1 (Strong Buy)

Nexstar Broadcasting Group, Inc. NXST , Earnings ESP of +5.36% and a Zacks Rank #2.

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APOLLO GROUP (APOL): Free Stock Analysis Report

BOYD GAMING CP (BYD): Free Stock Analysis Report

NORWEGIAN CRUIS (NCLH): Free Stock Analysis Report

NEXSTAR BRDCSTG (NXST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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