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FTI Consulting (FCN) Up 0.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for FTI Consulting (FCN - Free Report) . Shares have added about 0.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is FTI Consulting due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

FTI Consulting Tops Q2 Earnings and Revenues Estimates

FTI Consulting delivered solid second-quarter 2019 results, with both earnings and revenues beating the Zacks Consensus Estimates.

Adjusted earnings per share of $1.73 beat the Zacks Consensus Estimate by 78 cents and increased 51.8% on a year-over-year basis. The bottom line benefited from strong operating performance in the company’s Corporate Finance & Restructuring, Economic Consulting and Technology segments.

Total revenues of $606.1 million beat the consensus mark by $49 million and increased 18.4% year over year. The increase was driven by higher demand across all business segments and regions, and higher success fees.

Revenues by Segment

Corporate Finance & Restructuring segment revenues increased 34.4% year over year to $190 million. The upside was driven by higher demand for business transformation and transactions, restructuring services, and higher success fees. The segment contributed 31% to total revenues.

Forensic and Litigation Consulting segment revenues increased 9.2% year over year to $145.9 million. The improvement came on the back of higher demand for health solutions, construction solutions and disputes services. The segment contributed 24% to total revenues.

Strategic Communications segment revenues increased 2.8% year over year to $59.1 million. The uptick was driven by increase in project-based revenues in North America and EMEA, primarily associated with corporate reputation services. The segment contributed 10% to total revenues.

Economic Consulting segment revenues increased 16.6% year over year to $155.5 million. The increase was driven by higher demand for antitrust services in North America and EMEA. The segment contributed 26% to total revenues.

Technology segment revenues increased 19.8% year over year to $55.6 million. The increase was driven by higher demand for cross-border investigations. The segment contributed 9% to total revenues.

Operating Results

Adjusted EBITDA came in at $97.2 million, up 34.3% on a year-over-year basis. The increase was driven by higher revenues and improved utilization, partially offset by an increase in compensation expenses and selling, general and administrative ("SG&A") expenses. Adjusted EBITDA margin increased to 16% from 14.1% in the prior-year quarter.

Balance Sheet and Cash Flow

FTI Consulting exited the quarter with cash and cash equivalents of $189.1 million compared with $179.2 million in the prior quarter. Long-term debt was $290.5 million compared with $268 million at the end of the prior quarter. The company generated $47.6 million of net cash from operating activities and capex was $10.5 million in the quarter. It spent $48.3 million to repurchase 579,771 shares in the quarter.

2019 Guidance

Management raised adjusted EPS and revenue guidance for the year. Adjusted EPS is now anticipated in the range of $5-$5.50 compared with the previous guidance of $4. The mid-point  ($5.25) of the revised guided range is lower than the Zacks Consensus Estimate of $5.42. Management now expects revenues in the range of $2.175-$2.250 billion, compared with the previous guidance of at least $2.1 billion. The mid-point of the current range ($2.21 billion) is lower than the Zacks Consensus Estimate of $2.25 billion.

How Have Estimates Been Moving Since Then?

Estimates revision followed an upward path over the past two months. The consensus estimate has shifted 10.75% due to these changes.

VGM Scores

At this time, FTI Consulting has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

FTI Consulting has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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