Open your books and take out your red pens, investors. For-profit educator Corinthian Colleges (NYSE:COCO) is back in class and ready to hand in its fiscal Q3 2006 earnings report bright and early tomorrow. Here's what we'll be grading it on.
What analysts say:
- Buy, sell, or waffle? Level with last quarter, 14 analysts follow Corinthian, but their negativity has increased. Three analysts still say buy, but holds have fallen to eight, and the number of sell ratings has increased by two (to three sells, total.)
- Revenues. Revenues for the quarter are expected to decline 1% to $251.8 million.
- Earnings. Profits are predicted to fall 30% to $0.16 per share.
What management says:
Corinthian gave its investors a couple of pieces of good news over the last few weeks. First, in March, the firm announced a successful appeal against a request to revoke accreditation for three of its Georgia campuses, and the extension of these campuses' accreditation through the end of May pending rehearing of the case. Then, two days ago, Corinthian announced that a federal securities class action lawsuit against it in California District Court had been thrown out (this one can be appealed, but for the time being, it sounds like good news).
In outside-the-courtroom news, we reviewed the company's recent performance in January, when Corinthian beat analyst estimates and posted strong free cash flow for the quarter. In that same earnings release, Corinthian reaffirmed guidance for this full fiscal year and bracketed analyst estimates with its own projection of $0.15 to $0.17 in profits per share for fiscal Q3.
What management does:
Beating estimates is a relative success. But on objective measurements, Corinthian still isn't doing so hot. Rolling gross margins are down nearly 300 basis points over the last 18 months, and rolling operating and net margins have fallen even further, as selling, general, and administrative (SG&A) expenses continue to climb much faster than revenues (11% vs. 2% year over year in the last six months.)
|
Margins % |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
46.2 |
45.7 |
45.2 |
44.4 |
43.7 |
43.3 |
|
Op. |
14.8 |
13.6 |
12.9 |
11.7 |
10.3 |
9 |
|
Net |
8.3 |
7.7 |
7.6 |
6.1 |
5.2 |
4.3 |
One Fool says:
Last quarter, in response to my concerns over apparent discrepancies between the size of Corinthian's share buybacks and the resulting decline in share count, Senior VP for Investor Relations Anna Marie Dunlap advised that the weighted average shares outstanding shown in the Q3 earnings report should decline to approximately 88 million. I have no reason to doubt this, but this is one of several numbers we'll certainly be watching tomorrow. Others include the margins (of course), and student enrollments -- all the expenditures on SG&A are aimed at attracting new students, after all. We'll want to make sure those efforts are paying off.
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Fool contributor Rich Smith does not own shares of any company named above.
