Lincoln Educational Up to Strong Buy on Q3 Results - Analyst Blog

On Nov 29, Zacks Investment Research upgraded Lincoln Educational Services Corporation (LINC) to a Zacks Rank #1 (Strong Buy). Earnings estimates have been moving upwards ever since the education company posted better-than-expected third quarter 2014 results on Nov 4.

Why the Upgrade?

Lincoln Educational's share price has increased about 7% since the company released the third quarter results.

Lincoln Educational's top and bottom lines in the third quarter were better than the Zacks Consensus Estimate and the company's expectation on the back of improving starts in the quarter.

Lincoln Educational's third-quarter 2014 adjusted loss (excluding the impact of impairment of goodwill and long-lived assets) of 12 cents per share was narrower than the Zacks Consensus Estimate of a loss of 18 cents and the prior-year quarter loss of $1.12 per share due to a decline in expenses. The reported loss was also narrower than the company's expected loss of 14 cents to 20 cents per share.

Revenues of $84.7 million beat the Zacks Consensus Estimate of $84 million by 0.8%. However, revenues were down 4.4% year over year and stayed close to the higher end of the company's expected range of $83.0 million to $85.0 million. The year-over-year decline in revenues was due to a decline of 4% in student enrollment and lower revenue per student.

However, though student starts decreased 5.9% year over year, it was better than the company's expected range of 8% to 10% decline.

We believe, improved student start can be attributed to the company's focus on improving student outcome. The company has also been focusing on reducing expenses, rationalizing underperforming business and monetizing its real estate to improve its liquidity position.    

Other Stocks to Consider

Other stocks in the education industry worth considering include GP Strategies Corp. (GPX), Grand Canyon Education, Inc. (LOPE) and Capella Education Co. (CPLA). All the three education companies sport a Zacks Rank #1 (Strong Buy).