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Apollo Education Group Inc. (APOL - Analyst Report) is set to report first-quarter fiscal 2014 results on Jan 7, after the market closes. Last quarter, the education company posted a positive earnings surprise of 120%. Let us see how things are shaping up for this announcement.

Factors to Consider this Quarter

Solid cost control initiatives are expected to make up for the sluggish enrollment trends to boost earnings in the upcoming quarter. Apollo Education’s accelerated efforts to right-size its business through significant layoffs and campus closings have resulted in significant cost savings.

However, education companies like Apollo Education, DeVry, Strayer Education Inc. (STRA - Analyst Report) and others, have been witnessing weak enrollment trends in the past quarters. Sluggish new enrollment growth has been affected by the changing regulatory requirements, weak demand due to students’ aversion to debt, robust competition and a volatile economy. In fact, in the first quarter of fiscal 2014, new enrollments are expected to decline at similar or lower rates than the fourth quarter of 2013.

Apollo Education is consistently enhancing and expanding its services/programs and investing in academic quality to improve student experience and outcomes. Apollo Education’s investments in adaptive learning, curriculum development, new learning systems and student service platforms should improve student value proposition and retention rates. Moreover, the company is increasing the use of targeted discounts and scholarships to improve college affordability. All these efforts should improve enrollment trends gradually.

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 ESPand 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%.

Zacks Rank #2 (Buy): Apollo Education’s Zacks Rank #2 when combined with a 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:

KB Home (KBH - Analyst Report), with Earnings ESP of +28.57% and a Zacks Rank #3 (Hold).

Mondelez International, Inc. (MDLZ - Analyst Report), with Earnings ESP of +4.65% and a Zacks Rank #3 (Hold).

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