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Apollo Education Group, Inc. (APOL - Analyst Report) is set to report second-quarter fiscal 2014 results on April 1, before the market opens. Last quarter, it delivered a positive earnings surprise of 15.6%. Let’s see how things are shaping up for this announcement.

Factors to Consider this Quarter

Prudent cost management is helping Apollo beat earnings expectations quarter after quarter despite weak revenues and enrollment trends. The post-secondary education provider’s accelerated efforts to right-size its business through significant layoffs and campus closings are lowering the costs.

Notwithstanding weak top line and declining enrollment trends, the company raised the revenue, operating income and cost savings targets for 2014 at the first-quarter conference call. In fact, management expects enrollment trends to improve throughout 2014. We believe lower costs should boost profits for Apollo Education in the second quarter as well.

Apollo Education’s enrollments have been sluggish for several quarters due to regulatory challenges, changes and competition in the higher education industry. Enrollment trends throughout the education industry have been affected by changing regulatory requirements, sluggish demand due to students’ aversion to debt, robust competition and a volatile economy. Other education providers like DeVry Education Group Inc. (DV - Analyst Report) and ITT Educational Services have also witnessed sluggish enrollment trends for many quarters.

Apollo is investing in adaptive learning, curriculum development and new learning systems/student service platforms, which, coupled with the recent price cuts should improve student value proposition and retention rates. We expect these turnaround efforts to improve enrollment trends and boost margins in the future quarters.

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 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 -27.78%.

Zacks Rank:Apollo Education’s Zacks Rank #1 (Strong Buy) when combined with a negative ESP makes surprise prediction difficult.

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.

Other Stocks to Consider

Other stocks that have both a positive Earnings ESP and a favorable Zacks Rank are:

TAL Education Group (XRS - Snapshot Report), with Earnings ESP of +6.25% and a Zacks Rank #3 (Hold).

Coca Cola Enterprises, Inc. (CCE - Analyst Report),withEarnings ESP of +2.27% and a Zacks Rank #2 (Buy).

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