Apollo Education Group, Inc. (APOL) is set to report first-quarter fiscal 2015 results on Jan 8, before the market opens. Last quarter, it posted a positive surprise of 25.93%. Let’s see how things are shaping up for this announcement.
Factors to Consider this Quarter
Apollo Education Group expects first-quarter fiscal 2015 revenues in the range of $720 million to $730 million. Adjusted operating income is expected to range between $70 million and $75 million.
Apollo’s enrollments have been sluggish for many quarters due to regulatory challenges, changes and competition in the higher education industry. However, the rate of decline in starts has improved at a steady level throughout the year, indicating that the company’s branding, program diversification and student retention initiatives are gradually yielding results. As such, management does not expect the rate of decline in starts in the first quarter 2015 to be any worse than the last reported quarter.
Apollo Education Group is undergoing transition to a new online classroom platform at the University of Phoenix (UOP). These class room conversions are expected to continue to unfavorably impact revenue per student in the first half of 2015. Revenue per student is expected to decline around 8% in the first quarter and then steadily improve to about flat by year-end.
Meanwhile, the company is consistently enhancing and expanding its services and investing in academic quality to improve student experience and outcomes. Apollo’s initiatives include investments in adaptive learning, new degree and certificate-based programs, new modernized and significantly upgraded online classroom, and new learning and service platforms. In addition, innovation and recent price cuts should improve student value proposition and retention rates, going ahead.
Earnings Whisper?
Our proven model does not conclusively show that Apollo Education Group 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. 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 41 cents.
Zacks Rank #3 (Hold). Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, Apollo Education Group’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #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
Here are some other companies that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:
DeVry Education Group Inc. (DV) with an Earnings ESP of +1.30% and a Zacks Rank #3.
PulteGroup, Inc. (PHM) with an Earnings ESP of +2.44% and a Zacks Rank #2 (Buy).
Armstrong World Industries, Inc. (AWI) with an Earnings ESP of +10.71% and a Zacks Rank #2.
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