Calls of Note Part 3

- Banc of America note their significantly revised estimates for Career Education Corporation (NASDAQ:CECO) are built on the company's revised reporting of its five college divisions. Each of those divisions is in a fluid state right now as can be seen in the significant changes in growth and profitability. Thus, firm's outlook for each of these fluid segments is based on myriad assumptions regarding several equally fluid operating metrics -- starts, population, student earning rate and profitability. As a consequence, they have limited confidence in their below Consensus estimates. Of course, they have greater doubt that the Consensus outlook will be achieved as it embeds a more optimistic outlook for some combination of the college divisions.

The analyst notes that if forced to distill firm's outlook into one sound byte, it would be - operating stability (population and profitability) is achieved within the next twelve months with no signs of material growth thereafter. That somewhat sanguine outlook may be sufficient to entice patient, value-oriented investors to invest in CECO. Yet, they reiterate rating of Neutral as not only is operating uncertainty significant, but regulatory clouds should continue to loom large for at least twelve more months. Maintains $21 tgt.

Notablecalls: BofA has been bearish on the education names for quite a while and must say they have been right. I'm not sure the call is actionable but it will put a cap on any bounce CECO is trying to put together here.