Apollo Education Group, Inc. APOL is set to report third-quarter fiscal 2015 results on Jun 29, after the markets close. Last quarter, it posted a positive surprise of 37.50%. The company’s earnings have been able to beat the Zacks Consensus Estimate over the past four quarters. It has posted an average four-quarter positive surprise of 21.92%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Apollo Education Group Management expects third-quarter fiscal 2015 revenues in the range of $690 million to $705 million, down year over year. Also, the company expects operating loss is in the range of $85 million to $95 million. The downside reflects sluggish new enrollments, which the company has been facing over the past few quarters.
Soft new enrollment levels reflect regulatory challenges, changes and competition in the higher education industry. However, the rate of decline in new enrollment moderated at a steady pace throughout 2014 and the fiscal first quarter of 2015, indicating that the company’s branding, program diversification and student retention initiatives are gradually yielding results. However, this improving trend was not maintained in the fiscal second quarter 2015. This keeps us concerned for the third quarter also.
Moreover, Apollo Education Group is undergoing transition to a new online classroom platform at the UOP that has resulted in technical disruptions and greater-than-anticipated student attrition in the past two quarters, thereby impacting revenue per student. Henceforth, these classroom conversions would impact revenue per student in the third quarter of fiscal 2015 as well.
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 47 cents.
Zacks Rank: Apollo Education holds a Zacks Rank #4 (Sell). 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.
Stocks to Consider
Here are some companies from the schools and consumer discretionary sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat:
Bridgepoint Education, Inc. BPI with an Earnings ESP of +25.0% and a Zacks Rank #3 (Hold).
CBS Corporation CBS with an Earnings ESP of +2.56% and a Zacks Rank #3.
Hanesbrands Inc. HBI with an Earnings ESP of +6.0% and a Zacks Rank #3.
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