School's back in session, and the teachers are back ... on Wall Street. In tomorrow's news, we'll hear from for-profit educator Career Education (NASDAQ:CECO) on its Q3 2006 performance.
What analysts say:
- Buy, sell, or waffle? Seventeen analysts study ambivalence at Career Education (CEC). One says buy, four say sell, but a full dozen sit on the fence with hold ratings.
- Revenues. On average, they expect sales to fall 9% to $452 million for the quarter.
- Earnings. Likewise profits, which analysts think will be down 45% at $0.29 per share.
What management says:
Big changes are afoot in the uppermost levels of management at CEC, but it's not just the firm's founder who lost a job this quarter; the general counsel and the head of the firm's Gibbs division got the boot, too. In each of these three cases, I fear it's what the firm didn't say (i.e. a clear reason for the three departures) that will matter most to investors. With any luck, tomorrow's news will shed some light on this question -- but I'm not holding my breath.
What management does:
For a Fool report on what management did to shareholders last quarter, check out Anders Bylund's take on CEC's Q2 numbers. If you're pressed for time, the below table also tells the tale. The steep drop-off in both rolling operating and net margins shows you that something very bad indeed happened last quarter (CEC lost $0.49 per share when the market was expecting it to earn $0.49 per share.)
|
Margins % |
3/05 |
6/05 |
9/05 |
12/05 |
3/06 |
6/06 |
|---|---|---|---|---|---|---|
|
Gross |
68.2 |
68.9 |
69.4 |
69.1 |
69.1 |
68.8 |
|
Op. |
18.0 |
18.3 |
18.4 |
18.4 |
17.9 |
16.7 |
|
Net |
10.7 |
11.0 |
11.3 |
11.5 |
11.2 |
6.4 |
One Fool says:
Last quarter's abysmal results arose from three primary factors: (1) sales of educational services declined year over year; (2) whilst the cost of providing those services, and operating costs as well, both rose; and finally, (3) Career Education recorded its second consecutive quarterly impairment to goodwill -- reducing pre-tax earnings by a whopping $85 million.
Accordingly, we'll be looking for three remedies to CEC's dire situation in tomorrow's news. We want to see:
- Sales decline less than analysts predict (and preferably increase).
- And/or we want to see CEC's cost of providing services decline.
- Lastly, we can hope that the huge goodwill impairment that CEC took last quarter was of the "big bath" variety -- a phenomenon in which a firm facing an inescapable losing quarter shovels as much financial loss as possible into that quarter, making future quarters' numbers look the better by comparison. If that turns out to have been the case, CEC might actually give its investors a pleasant surprise tomorrow.
Competitors:
- Apollo Group (NASDAQ:APOL)
- Strayer (NASDAQ:STRA)
- Corinthian Colleges (NASDAQ:COCO)
- DeVry (NYSE:DV)
- ITT Educational (NYSE:ESI)
- Laureate (NASDAQ:LAUR)
Need some remedial education on CEC? You'll find it in:
- Career Education CEO Expelled
- 3 Stocks That Missed the Mark
- Foolish Forecast: Career Education's Q2 Report Card
- Career Education Gets Detention, Again!
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Fool contributor Rich Smith does not own shares of any company named above.
