Christmas break has come and gone, kids. Time to get back to work. Your next assignment: digesting the earnings news coming out of for-profit educator ITT (NYSE:ESI). The company will release Q4 and full-year 2005 earnings before market-open tomorrow.

Wall Street Wisdom:

  • General consensus. Eleven analysts follow ITT, splitting their ratings pretty evenly between "buy" and "hold."
  • Revenues. Consensus estimates put Q4 revenues up by 9% over the year-ago quarter, with $182.4 million being the targeted number.
  • Earnings. Profits growth is expected to be a bit better than that, with analysts predicting an 11% rise to $0.80 per share. (Speaking of which, it's perhaps worth mentioning that ITT has beaten analyst estimates for the past 23 straight quarters.)

Margin watch:
ITT is on a roll. As you can see from the chart below, gross, operating, and net margins have all been steadily increasing over the past 18 months.

Margins%

6/04

9/04

12/04

3/05

6/05

9/05

Gross

48.6

49.8

51.6

52.5

53.2

53.6

Op.

20.5

22.0

23.4

23.8

24.3

24.6

Net

11.1

11.1

12.2

12.8

13.7

15.7

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish lookout:
Barring some unforeseen disaster, it's practically guaranteed that TTM operating and net margins will continue their upward trend over at least the next few quarters. The reason being that it was only in June 2005 that the Department of Justice called off its investigation into the company's marketing practices, and only in September and October that ITT saw a string of lawsuits against it dismissed or settled on favorable terms. Freed of the costs of these actions, both in terms of lawyer's fees and bad publicity, the firm's net margin simply must rise.

Competitors:
Of course, even with the government and plaintiffs' lawyers off its back, ITT still faces plenty of competition if it's to succeed: Apollo (NASDAQ:APOL), DeVry (NYSE:DV), Corinthian (NASDAQ:COCO), Career Education (NASDAQ:CECO), and Strayer (NASDAQ:STRA) all number among ITT's rivals.

Fool contributor Rich Smith does not own shares of any company named above.