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Analyst Blog

On May 17, Zacks Investment Research downgraded business services provider Navigant Consulting Inc. (NCI - Analyst Report) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #4 (Sell) primarily due to downward estimate revisions following its dull first-quarter 2014 earnings results.

Despite the downtrend, the company still has the potential to drive the stock up. The stock is currently trading at a forward P/E of 16.0x with a PEG ratio of 1.6x and long-term earnings growth expectation of 10.0%.

Why the Downgrade?

Navigant reported unimpressive first-quarter results with revenues and earnings declining year over year due to headwinds in core markets. Net income from continuing operations was $10.4 million or 21 cents per share versus $13.1 million or 26 cents per share in the year-ago quarter.

Excluding one-time items, adjusted earnings for the reported quarter were 20 cents per share compared with 26 cents per share in the prior-year period. The adjusted earnings missed the Zacks Consensus Estimate by a couple of cents for a negative earnings surprise of 9.1%.

Total revenue was down 5.6% year over year to $197.7 million while revenues before reimbursements (RBR) decreased 4.4% to $175.1 million in the reported quarter. The decrease in first-quarter 2014 revenues was attributable to lower RBR in the Disputes, Investigations & Economics segment; Financial, Risk & Compliance; and Energy segment.

Over the last 7 days, all the earnings estimates for Navigant were revised downward for 2014 as well as for 2015. This seems to be fallout of lackluster results in the recently reported quarter. Navigant continues to face challenges on both the domestic and international fronts. This is primarily attributable to the difficulties in managing and staffing foreign operations, relatively limited new assignments, currency fluctuations and regulatory stringencies due to the uncertainty in the global economy.

Other Stocks to Consider

Other stocks that look promising and are worth looking into now include Huron Consulting Group Inc. (HURN - Snapshot Report), The Hackett Group, Inc. (HCKT - Snapshot Report) and CoreLogic, Inc. (CLGX - Snapshot Report), each carrying a Zacks Rank #2 (Buy).

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