Will American Public (APEI) Disappoint This Earnings Season? - Analyst Blog

American Public Education, Inc. APEI is set to report first-quarter 2014 results on May 8. Last quarter, the company delivered a negative earnings surprise of 5.56%.

Let's see how things are shaping up for this announcement.

Factors to Consider this Quarter

American Public's fourth-quarter 2013 results were disappointing with both earnings and revenues declining year over year. The poor results were mostly due to worse-than-expected decline in total enrollment and new student enrollment levels. Enrollments in the fourth quarter were affected by decline in enrollments of students using Department of Defense Tuition Assistance or TA benefits. The temporary suspension of the TA due to the government shutdown in Oct 2013 and lowering of the benefits by the military greatly hurt enrollments of military students.

Management expects military enrollment hurdles to continue in the first quarter of 2014.  New enrollments by students using TA benefits are expected to decline once again in the to-be-reported quarter due to ongoing budgetary constraints and uncertainty.

Accordingly, total enrollments are expected to decline in the range of 5% to 7% while student starts are expected to go down in the range of 7% to 9%. American Public expects revenues to remain in the range of flat to an increase of 3% while first-quarter 2014 earnings are projected to be between 43 cents and 48 cents — a significant decline from the prior-year level.

Management also expects new student enrollments at Hondros College (acquired in Nov 2013) to increase 45% in first-quarter 2014.

Earnings Whispers?

Our proven model does not conclusively show that American Public 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 0.00%.

Zacks Rank: American Public has a Zacks Rank #3 (Hold) which when combined with a 0.00% 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:

Fastenal Company FAST with Earnings ESP of +2.27% and a Zacks Rank #3.

Vulcan Materials Company VMC with Earnings ESP of +5.88% and a Zacks Rank #1 (Strong Buy).

TexasIndustries Inc. TXI, with Earnings ESP of +7.14% and a Zacks Rank #3.