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We expect higher education provider, American Public Education, Inc. (APEI - Analyst Report) to beat expectations when it reports the first-quarter 2013 results on May 9.

Why a Likely Positive Surprise?

Our proven model shows that American Public is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 1.75%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks #3 Rank (Neutral): American Public carries a Zacks Rank #3 (Hold).Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of American Public’s Zacks Rank #3 (Hold) and +1.75% ESP makes us confident in looking for a positive earnings beat on May 9th.

What is Driving the Better than Expected Earnings?

Strategic initiatives like ePress initiative, information and technology upgrades, Title IV processing automation and lower bad-debt expense are expected to lead to a positive earnings surprise in the upcoming quarter, even though new student starts are expected to decline. Moreover, the company intends to spend less on traditional media advertising, which are relatively expensive and easily attract fund abusers. This will further lower operating costs.

The positive trend is seen in the trailing four-quarter average surprise of almost 12.0%, which was greatly helped by the 10.5% positive surprise in the last-reported quarter. This was possible because American Public did a good job of controlling costs owing to its strategic initiatives. Top line growth and brisk student enrollments also helped.

Other Stocks to Consider

American Public is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers:

Giant Interactive Group, Inc. , with an Earnings ESP of +4.76% and a Zacks Rank #2 (Buy)

Perion Network Ltd (PERI), with an Earnings ESP of +8.57% and a Zacks Rank #2 (Buy)

K12, Inc. (LRN - Snapshot Report), with an Earnings ESP of +4.35% and a Zacks Rank #3 (Hold)

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