After three straight quarters of missing analyst earnings targets, for-profit educator Career Education (NASDAQ:CECO) has just one last chance to save itself from a negative sweep of the worst kind this fiscal year. On Thursday, the firm hopes to redeem itself as it reports on its Q4 and full-year 2006 performance.

What analysts say

  • Buy, sell, or waffle? Eighteen analysts study ambivalence at Career Education (CEC). One says buy, four say sell, and a baker's dozen sit on the fence with hold ratings.
  • Revenues. On average, they expect quarterly sales to fall 7% to $490.3 million.
  • Earnings. Profits are predicted to be cut nearly in half at $0.36 per share.

What management says:
Big changes were afoot at Career Education this quarter. Like an academic Oprah, the firm first slimmed down -- shedding 13 underperforming schools and campuses in November -- then chubbied up, announcing last month that it "has acquired Istituto Marangoni, a world-renowned post-secondary fashion and design school with locations in three prominent international fashion capitals: Milan, London, and Paris." No word yet on how much CEC paid for its "world-renowned" acquisition, however. Perhaps we'll get more details on that tomorrow. Post-closing, CEC will be running a total of 15 schools and campuses abroad, including 10 INSEEC Group locations in France, American InterContinental University in London, the International Academy of Design and Technology in Canada, and of course, the three "Istitutos."

What management does:
All year long, CEC has watched its margins contract at each of the gross, operating, and net margin levels. The November disposition of assets should help fix that once any one-time charges have been worked through. We'll have to wait for more details on Istituto Marangoni's business, though, to learn whether it will help, or hurt, firmwide profitability.

Margins

6/05

9/05

12/05

3/06

6/06

9/06

Gross

68.9%

69.4%

69.1%

69.1%

68.8%

68.0%

Operating

18.3%

18.4%

18.4%

17.9%

16.7%

14.6%

Net

11.0%

11.3%

11.5%

11.2%

6.4%

4.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Why did CEC choose to implement its re-expansion beyond our nation's borders? Perhaps because, since 2005, the U.S. Department of Education had restricted CEC's ability to buy other schools, or open new campuses, here at home. So the other good news for CEC this quarter was that these restrictions were finally lifted in January. Now considered "compliant" by the Feds (with regard to, for example, its financial aid practices), CEC is free to seek out (or build) more profitable domestic operations than the ones it shed in November.

CEC is all ready to hit the ground running, too. Having received approval last year to open new locations in San Antonio and Sacramento, the firm plans to set up International Academy of Design and Technology campuses in these cities later this year. Here's hoping that the latest wave of expansions turns out better than the last.

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:

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