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FTI Consulting (FCN) Poised for Modest Growth Despite Risks

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On Dec 27, we issued an updated research report on management services provider, FTI Consulting, Inc. (FCN - Free Report) .

Increased regulatory scrutiny and a proliferation of corporate litigation matters are likely to propel demand for FTI Consulting’s products. Additionally, structural change has become a necessity in the rapidly evolving global markets as management teams look to fend off rivals, protect intellectual property rights and transform businesses via M&A, divestiture and other restructuring activities. These developments call for FTI Consulting’s specialized skill sets and are likely to boost its revenues.

In addition, FTI Consulting’s unique capabilities of bringing together damage assessment, accounting, economics, statistics, finance and industry under a single umbrella make it an excellent partner for global clients dealing with international arbitration issues. This, in turn, leads to continued revenue growth from the existing international operations. Moreover, acquisitions on a global basis in high-growth segments and significant investments in technology are likely to fuel growth. The company recently elected few highly qualified executive officers for improving its operational performance in the long term. These drivers are expected to enhance economic performance of the segments and are likely to benefits the company in 2017.

FTI Consulting also increased its existing share repurchase program to buy an additional $100 million worth of stocks over a period of time through the open market or through negotiated transactions. The share buyback program is an extension of the strategic objective of the company to reward its shareholders with risk-adjusted returns.

However, FTI Consulting has underperformed the industry with a year-to-date loss of 4.2% against a gain of 27.6% for the latter. Despite improving corporate earnings and a strong liquidity, clients’ spending patterns remained cautious, given concerns over the current market environment, volatile financial markets and a lack of visibility regarding the impact of future tax and regulatory policies.



FTI Consulting is also highly exposed to foreign exchange rate risk. The revamped market dynamics from the Brexit referendum are expected to affect its trade relationship with the U.K. The company is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company.

Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Better-ranked stocks in the industry include UniFirst Corporation (UNF - Free Report) , NV5 Global, Inc. (NVEE - Free Report) and Accenture plc (ACN - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UniFirst has a long-term earnings growth expectation of 10%. It has beaten earnings estimates thrice in the trailing four quarters with a positive surprise of 3.7%

NV5 Global has a long-term earnings growth expectation of 20%. It has beaten earnings estimates thrice in the trailing four quarters with a positive surprise of 4.5%.

Accenture has a long-term earnings growth expectation of 10.3%. It has beaten earnings estimates in each of the trailing four quarters with a positive surprise of 2.6%.

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