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Universal Technical Institute, Inc. (UTI - Analyst Report) is set to report fourth-quarter and fiscal 2013 results on Dec 3. Last quarter, the automotive training school beat the Zacks Consensus Estimate of breakeven earnings by a penny. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

The company’s enrollments have been trending down consistently over the past few quarters as a result of macroeconomic headwinds; sluggish demand due to prospective students’ reluctance in taking loans and continued challenges in obtaining student financing; changing regulatory requirements; increased price sensitivity and affordability concerns; and increased competition. The company works closely with leading original equipment manufacturers in the automotive, diesel, motorcycle and marine industries such as such as, Ford Motor Co. (F - Analyst Report), Honda Motor (HMC - Analyst Report), Harley Davidson (HOG - Analyst Report) and many more.

However, new student starts improved sequentially in the third quarter due to improving demand. Though the macro challenges continue, the auto/transportation market is rebounding which combined with the aging workforce is increasing market demand for skilled auto technicians. Accordingly, the company witnessed improved student applications in the quarter.

New student starts are expected to grow in the mid-high single-digit range in the fourth quarter (as inquiries and applications improve) but remain flat in the first quarter of 2014.

Moreover, the company is pushing hard to manage costs and improve marketing and operating efficiency to counter the sluggish student enrollment environment. These efforts have led to sequentially improved profits in the second and third quarters and are expected to generate further improvement in the fourth quarter.

Earnings Whispers?

Our proven model does not conclusively show that Universal Technical 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 Zacks ESP is 0.00%.

Zacks Rank: Universal Technical’s Zacks Rank #3 (Hold), when combined with 0.00% ESP, 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:

In schools you may consider DeVry, Inc. (DV - Analyst Report), with Earnings ESP of +4.05% and a Zacks Rank #3 (Hold).

In personal services sector you may consider Regis Corp. (RGS - Analyst Report), with Earnings ESP of +50.0% and a Zacks Rank #3 (Hold).

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