Christmas break is over, and it's time to get back to school -- both for students, and for for-profit educator Apollo Group (Nasdaq: APOL). Apollo delivers its fiscal first-quarter 2008 progress report on Tuesday.

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts study Apollo. Ten rate it a buy, six a hold, and only one says sell.
  • Revenue. On average, analysts expect to see revenue rise 12% to $750.9 million.
  • Earnings. Profits are predicted to rise in tandem, up 11% to $0.73 per share.

What management says:
With its shares up more than 70% over the past year, you know Apollo has been doing something right. Identifying these successes in last quarter's earnings report, CEO Brian Mueller pointed to "double-digit revenue and enrollment growth ... [and] productivity gains in our enrollment counselor effectiveness, advertising, student persistence, academic excellence and program expansion."

What management does:
The numbers bear out Mueller's optimism, at least in part. And as the saying goes, two out of three ain't bad. As we discussed in our earnings write-up three months ago, both revenue and enrollment climbed 10% at Apollo last year (in the double digits by the skin of their teeth). However, Mueller's ballyhooed "productivity gains" are proving elusive. Gross margins are right where they were a year ago, and operating and net margins are both far below their respective year-ago marks.

Margins

5/06

8/06

11/06

2/07

5/07

8/07

Gross

56.3%

55.2%

54.6%

53.9%

53.9%

54.6%

Operating

30.2%

28.1%

26.5%

23.8%

23.2%

23.0%

Net

18.4%

16.7%

15.9%

14.9%

14.5%

15.0%

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:
Don't get me wrong -- Apollo still posts operating profit margins that put to shame the single-digit numbers posted by peers like Corinthian (Nasdaq: COCO), Career Education (Nasdaq: CECO), and Universal Technical (NYSE: UTI). When it comes to wringing profit pennies out of revenue dollars, only Strayer (Nasdaq: STRA) and ITT (NYSE: ESI) do a better job than Apollo. And yet, while it may well be improving on all the metrics Mueller cites, Apollo's improvements aren't yet making themselves felt on its income statement. Despite last year's 10% sales growth, Apollo's profits flatlined against fiscal 2006.

Fortunately, the columns toward the left side of the above table show us that the company can do better. And if it's to achieve the 14% long-term annual profits growth that Wall Street is expecting, it will need to.

What did we expect out of Apollo last quarter, and what did we get? Find out in:

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool's disclosure policy likes meatloaf for breakfast.