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Strategic Education (STRA) Q3 Earnings: What's in the Cards?

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Strategic Education Inc. (STRA - Free Report) is slated to report third-quarter 2018 results on Nov 8, before the opening bell. This for-profit education company’s top and bottom lines fared well in the last reported quarter. In fact, its adjusted earnings of 87 cents grew 33.8% from the year-ago period. Revenues also improved 1.7% to $114.7 million in the last reported quarter.

Shares of Strategic Education have outperformed its industry so far this year. Its shares have surged 46.9% against the industry’s fall of 13.2% in the said period.




Let’s See How Things are Shaping Up for This Announcement

On Aug 1, 2018, Strategic Education, Inc. or SEI announced that it completed the proposed merger deal with Strayer Education, Inc. and Capella Education Company to create SEI, a national leader in education innovation.

Both the companies’ new student enrollment is strong. Notably, Capella reported a 15% year-over-year increase in new student enrollment, marking its strongest performance in more than three years and second strongest over 10 years. Both the university’s educational programs are most suitable for working adults as they are designed in a convenient, accessible and flexible manner to meet their needs. Meanwhile, it offers weekend and evening courses, as well as online educational courses, which are well suited for the work-day schedules of adults.

Additionally, SEI introduced web and mobile app-based courses with New York Code and Design Academy (NYCDA). It is an income share agreement payment model, wherein students pay incrementally for their courses after getting a job. The introduction of these courses is contributing significantly to the company’s top line. We expect the trend to continue in the to-be-reported quarter as well.

However, SEI is exposed to seasonal fluctuations, which cause its operating results to fluctuate from quarter to quarter, specifically in the third quarter (July through September). The trend is attributable to fewer student enrollment during the summer months.

Earnings & Revenue Expectation

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

The Zacks Consensus Estimate calls for Strategic Education’s third-quarter revenues to increase 70.9% to $185.4 million. The consensus estimate for earnings is pegged at 71 cents, implying growth of 108.8% on a year-over-year basis.

Strategic Education Inc. Price and EPS Surprise

What Does the Zacks Model Say?

Our proven model shows that Strategic Education is likely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +9.35%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Strategic Education currently carries a Zacks Rank #3. Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other consumer discretionary stocks that you may also want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Activision Blizzard, Inc. has an Earnings ESP of +1.75% and a Zacks Rank #3. The company is slated to report quarterly results on Nov 8.

WillScot Corporation (WSC - Free Report) has an Earnings ESP of +195.24% and holds a Zacks Rank #3. The company will report quarterly numbers on Nov 8.

Viacom, Inc. has an Earnings ESP of +1.17% and a Zacks Rank #3. The company is scheduled to report quarterly results on Nov 16.

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