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School Stocks' Q1 Earnings Due on May 2: LOPE, STRA, CPLA

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The first-quarter earnings season is past the halfway mark. More than 900 companies including 142 S&P 500 members are due to report results this week.

According to the latest Earnings Preview, results of 267 S&P 500 members are already out. As of Apr 27, 2018, total earnings for these S&P 500 members were up 25.1% year over year on more than 10% higher revenues. Of these, 76.8% surpassed earnings estimates, while 73.8% beat revenue expectations. Total earnings for the S&P 500 index are likely to increase 22.6% from the same period last year on 8.4% higher revenues.

Meanwhile, total earnings of the consumer discretionary sector are expected to increase 12.1% on 6.6% higher revenues.

A Look at the School Industry

Coming to the school industry within the consumer discretionary sector, currently the Strayer Education Inc. (STRA - Free Report) and Capella Education Inc. (CPLA - Free Report) merger deal is in focus apart from other earnings releases. On Oct 30, 2017, for-profit school companies Strayer Education and Capella Education agreed to an all-stock merger in a deal valued at $1.9 billion. The combined company would be renamed "Strategic Education Inc." when the deal closes and will trade under the ticker symbol, STRA .

Meanwhile, the Trump administration is set to revise for-profit education industry regulations, as announced by the U.S. Department of Education last year. The department intends to bring about changes to the Borrower Defense to Repayment (BDR) and Gainful Employment (GE) system, introduced during Obama’s reign.

For-profit education companies are poised to surge, given the friendly approach of the Trump administration toward these companies.

Apart from the much-needed regulatory support, industry giants are finding innovative ways to compete in an increasingly competitive education landscape and deliver returns to shareholders. In order to boost growth, school companies have resorted to aggressive cost-cutting measures through significant layoffs and campus closings.

For-profit education companies are investing in digital capabilities and stepping up social media efforts to increase their brand value as well as boost enrollment growth. The for-profits are also forging corporate and community college partnerships to educate their workforce. Additionally, companies are improving their technology and infrastructure, increasing investments to improve academic quality and retain students, buying complementary businesses, and regularly introducing new programs and specializations to boost student outcomes.

School Stocks Reporting on May 2

Three companies from the school industry are set to report quarterly results on May 2. Let's see how things are shaping up for their respective announcements.

Our research shows that when a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) stock is combined with a positive Earnings ESP, the chance of beating earnings estimates is high. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Grand Canyon Education, Inc. (LOPE - Free Report) , a provider of online post-secondary education services, is slated to release results after the market closes.

The company has been doing well with its revenues increasing 10.9% year over year in the last reported quarter on the back of 10.2% growth in its end-of-period enrollment. The company have been registering higher number of new working adult students for its online campus (online enrollment grew 10.5% in Q4). The continued growth of the University's brand, 76 new programs, certificates and emphasis areas rolled out in the recent past, and positive results from newly branded advertising campaigns designed earlier have all been contributing positively.

Per the Zacks Consensus Estimate, the number of online students is expected to grow 9.5% year over year in the first quarter. Meanwhile, the consensus estimate for ground students of 17,400 reflects year-over-year growth rate of 9.7%.

Overall, for the first quarter, the Zacks Consensus Estimate for earnings is pegged at $1.39, reflecting a 24.1% year-over-year increase. The consensus estimate for revenues is pegged at $274.1 million, implying a 10.4% increase.

The company delivered a positive surprise of 8.18% in the last reported quarter. Also, the company has beaten estimates in all the past four quarters, resulting in an average positive surprise of 12.28%.

Our proven model does not conclusively hint at an earnings beat for the company this quarter, as Grand Canyon does not have a positive Earnings ESP and a Zacks Rank #3 or higher. The company carries a Zacks Rank #3 and has an Earnings ESP of 0.00%.

Strayer Education, Inc., a regional proprietary institution of higher education, offering undergraduate and graduate degree programs, is slated to release results before the opening bell.

The company delivered a negative surprise of 15.5% in the last reported quarter. As the company missed estimates in two of the past four quarters, it has an average negative surprise of 5.06%.

We cannot conclusively predict a beat for the company as it has an Earnings ESP of 0.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company expects its total enrollments at Strayer University to grow 6% to approximately 46,100 students in the first quarter from the prior-year quarter. New student enrollments are anticipated to increase approximately 6%. Continuing student enrollments are likely to increase approximately 6%. Revenue per student in the quarter is likely to decline 5%. Tax rate for the quarter is expected in the range of 21-22%.

Overall, for the first quarter, the Zacks Consensus Estimate for earnings is pegged at $1.11, reflecting a 16.8% year-over-year increase.

Strayer Education, Inc. Price and EPS Surprise

 

Strayer Education, Inc. Price and EPS Surprise | Strayer Education, Inc. Quote

Capella Education Company, through its wholly owned subsidiaries, provides online post-secondary education services in the United States, focused primarily on working adults.

The company delivered a negative surprise of 14.00% in the last reported quarter. Also, the company has beaten estimates in three of the past four quarters, resulting in an average positive surprise of 3.48%.

We cannot conclusively predict a beat for the company as it has an Earnings ESP of 0.00% and a Zacks Rank #2.

Overall, for the first quarter, the Zacks Consensus Estimate for earnings is pegged at $1.16, reflecting a 23.4% year-over-year increase. The consensus estimate for revenues is pegged at $113 million, implying a 1.1% increase.

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