Will Universal Technical (UTI) Q4 Earnings Post a Surprise? - Analyst Blog

Universal Technical Institute, Inc. (UTI) is set to release its fourth-quarter fiscal 2014 results on Dec 2, after the market closes. Last quarter, it posted in line results. Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

Universal Technical expects starts to decline in mid-single digits in the soon to be reported quarter compared with the year-ago level due to difficult economic conditions and regulatory concerns. However, the company expects operating income to improve year over year.

Universal Technical had doubled its registration fee, which improved its revenue per student in the third quarter of 2014. This is expected to  have a favorable impact this quarter as well. Also higher registration fee improved the quality of student application in the prior quarter and is expected to have a positive impact on the fourth quarter results as well.

In addition, the company is increasing the number of scholarships and making marketing investments in order to improve student starts. However, revenues are still being eroded by declining enrollments levels, a trend which the company expects to continue in the near term.

Earnings Whisper?

Our proven model does not conclusively show that Universal Technical Institute 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 ESP for Universal Technical Institute is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 7 cents.

Zacks Rank #2 (Buy): Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, Universal Technical Institute's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #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

Here are some other companies that can be considered as our model shows that they have a positive ESP and a favorable Zacks Rank:

Capella Education Co. (CPLA) with an Earnings ESP of +1.10% and a Zacks Rank #1 (Strong Buy).

Beazer Homes USA Inc. (BZH) with an Earnings ESP of +66.67% and a Zacks Rank #3 (Hold).

Toll Brothers Inc. (TOL) with an Earnings ESP of +1.41% and a Zacks Rank #3.