Apollo Education (APOL) Q3 Earnings: What's on the Cards?

Apollo Education Group, Inc. APOL is set to report third quarter fiscal 2016 results on Jul 7. However, owing to the pending acquisition of Apollo Education Group by a consortium of investors, the education company will not hold any conference call following the announcement. If the deal gets all the necessary approvals, the transaction is expected to close in Aug 2016.

Last quarter, it posted a massive negative surprise of 210.0%. The company has posted three negative earnings surprises in the past four quarters and has an average negative surprise of 52.31%.

APOLLO GROUP Price and EPS Surprise

APOLLO GROUP Price and EPS Surprise | APOLLO GROUP Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

Apollo Education’s sales and profits were disappointing in fiscal 2015 as well as the first two quarters of fiscal 2016 due to lower enrollment trends at its flagship school – University of Phoenix (UOP). These trends are not likely to be reversed in the soon-to-be reported quarter.  

Though Apollo Education is undertaking several initiatives to transform UOP, it will take several quarters before enrollments rebound and stabilize. As such, UOP’s enrollment trends are likely to decline year over year in the third quarter of fiscal 2016 as well. Moreover, Apollo Global – the international segment – has been performing well, which lends some top-line support. Also, the company’s expansion in international markets, and new and upgraded programs should drive enrollment trends in Apollo Global in the third quarter of fiscal 2016.

Earnings Whisper?

Our proven model does not conclusively show that Apollo Education is likely to beat earnings this quarter. This 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 28 cents.

Zacks Rank: Apollo Education carries 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 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 in their upcoming releases:

Carter's, Inc. CRI, with an Earnings ESP of +4.62% and a Zacks Rank #2 (Buy)

Masonite International Corporation DOOR, with an Earnings ESP of +3.37% and a Zacks Rank #3

Callaway Golf Co. ELY, with an Earnings ESP of +12.12% and a Zacks Rank #2

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