Will ITT Educational (ESI) Disappoint This Earnings Season? - Analyst Blog

ITT Educational Services Inc. ESI is set to report first-quarter 2014 results on May 22, before the market opens. Last quarter, it posted a negative surprise of -145.4%. Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

ITT Educational Services has been providing institutional scholarships and awards to students through Opportunity Scholarships since 2013. This has resulted in new enrollment growth for three quarters in a row, a trend which is expected to continue in the upcoming quarter.

However, increases in scholarships and awards took a toll on the top line in the fourth quarter 2013. In fact, the top-line decline resulted in a loss in the quarter, which compared unfavorably with the Zacks Consensus Estimate and the year-ago figure.

Also, the company has been witnessing a decline in total enrollment levels for the past few quarters. This trend is likely to continue and the company is not likely to report positive total enrollment growth in first quarter 2014.

For 2014, the company expects revenue per student per quarter in the range of 4,300 to 4,500 and EBITDA in the range of $140 million to $170 million.      

Earnings Whisper?

Our proven model does not conclusively show that ITT Educational Services 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:  ITT Educational Services' Earnings ESP is 0.00%.

Zacks Rank #5 (Strong Sell): 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.