K12 (LRN) came out with a quarterly loss of $ 0.15 per share against Zacks’ consensus estimate of a loss of $ 0.18. This compares to a profit of $ 0.30 per share a year ago. These figures are corrected for non-recurring items.
This quarterly report represents a surprise earnings of 16.67%. A quarter ago, this online education company was expected to post a profit of $ 0.17 per share when it actually made a profit of $ 0.25, offering a surprise of 47.06%.
In the past four quarters, the company has beaten consensus EPS estimates four times.
K12, which is owned by the Zacks Schools industry, reported revenue of $ 400.23 million for the quarter ended September 2021, beating Zacks’ consensus estimate by 8.99%. This compares to last year’s revenue of $ 370.96 million. The company has beaten consensus revenue estimates four times in the past four quarters.
The sustainability of the immediate stock price movement based on recently released numbers and future earnings expectations will primarily depend on management feedback on the profit call.
K12 stocks have added about 56.2% year-to-date against the S&P 500’s 19.5% gain.
What’s next for K12?
While K12 has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?
There are no easy answers to this key question, but a reliable metric that can help investors solve this problem is the company’s earnings outlook. This not only includes the current consensus earnings expectations for the coming quarter (s), but also how those expectations have changed in recent times.
Empirical research shows a strong correlation between short-term stock market movements and trends in earnings estimate revisions. Investors can follow these revisions on their own or rely on a proven scoring tool like Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.
Prior to this publication of the results, the trend in revisions to the estimates for K12 was unfavorable. While the magnitude and direction of estimate revisions may change as a result of the company’s just released earnings report, the current status translates into a Zacks # 4 (sell) rank for the stock. Thus, stocks are expected to underperform the market in the near future. You can see the full list of Zacks # 1 Rank (Strong Buy) stocks today here.
It will be interesting to see how the estimates for the next quarters and the current year evolve in the days to come. The current consensus estimate of EPS is $ 0.74 out of $ 373.3 million in revenue for the coming quarter and $ 1.76 out of $ 1.5 billion in revenue for the current year.
Investors should be aware that the outlook for the sector can also have a significant impact on the performance of the stock. In terms of Zacks industry rankings, schools currently rank in the top 33% of the more than 250 Zacks industries. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.
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