Can Bridgepoint Turn Itself Around?

Next Monday, Bridgepoint Education (NYSE: BPI  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

As the company behind for-profit educational institutions University of the Rockies and Ashford University, Bridgepoint Emerson was at the forefront of the big increase in popularity among those and similar schools during the recession. Yet a combination of regulatory scrutiny and improving economic conditions has hurt its business substantially. Let's take an early look at what's been happening with Bridgepoint Education over the past quarter and what we're likely to see in its quarterly report.

Stats on Bridgepoint Education

Analyst EPS Estimate

$0.41

Change From Year-Ago EPS

(42%)

Revenue Estimate

$217.4 million

Change From Year-Ago Revenue

(13.2%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Bridgepoint deliver on lowered expectations?
Analysts have sharply downgraded their views of Bridgepoint's earnings prospects lately, cutting more than a dime from their first-quarter earnings-per-share estimates, and making a reduction twice that size for the full 2013 year. The stock, though, has shown signs of already having hit bottom, having risen 7% since late January.

Bridgepoint is suffering from the same trends of declining enrollment and falling revenue and earnings that we've seen throughout the industry. Yet rather than punishing the stocks further, investors have started taking poor numbers in stride. For instance, ITT Educational (NYSE: ESI  ) saw its shares soar 30% in a single day last month after its quarterly report, despite seeing overall enrollment plunge 14%, new-student enrollment fall nearly 4%, and revenue drop almost 16%. Capella Education (NASDAQ: CPLA  ) actually posted new-enrollment gains for its most recent quarter, limiting total-enrollment declines to just 3% and topping earnings estimates.

One encouraging sign is that Bridgepoint has been taking steps to improve its quality. By tailoring its marketing, Ashford University has been able to attract student prospects that are more likely to be successful, and its orientation program weeds out more than a quarter of those prospects to further refine its class quality.

Bridgepoint has also taken its recent accreditation controversy head-on. It's been working with the Higher Learning Commission and the Western Association of Schools and Colleges to try to sort out issues with regard to Ashford University's accreditation, and the company remains confident that it will be able to stay accredited with its plan for compliance by July.

In Bridgepoint's quarterly report, look closely at enrollment figures to see whether the company is joining in the overall trend toward recovering student counts. As the industry gets more competitive, it'll be essential for Bridgepoint to hang onto its share of the student pool.

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