Robust Results from CRA International

Boston, Massachusetts-based CRA International Inc. (CRAI - Analyst Report) reported pro forma earnings of 48 cents per share in the second quarter of 2011, handily beating both the Zacks Consensus Estimate of 38 cents per share and the year-ago quarter earnings of 19 cents per share.

Net earnings per share on a GAAP basis improved substantially from the year-ago loss of 14 cents to 40 cents in the reported quarter.

The better-than-expected results were aided by an active pipeline for both litigation and management consulting businesses and cost-containment initiatives, which led to double-digit growth in operating margin for the second time in two years.

Total revenue grew 20% on a year-over-year basis to $79.6 million and surpassed the Zacks Consensus Estimate of $78.0 million. The upside in revenue was driven by higher demand for all services and solid contribution from international operations. 

Quarter Performance 

CRA International generated 29% of the total revenue from the international market which is highest since the fourth quarter of fiscal 2009.

During the reported quarter, CRA International achieved a utilization rate of 74% based on broad-based improvement in demand for services and strong international operations and client facing activities.  

CRA International witnessed a year-over-year increase of 290 bps in gross margin to 33.0% and a 410-bp surge in operating margin to 10.6%, based on its efficient restructuring activities.

Selling, general and administrative expenses, as a percentage of revenue, fell 140 bps to 20.8% during the quarter.

Financial Position

As of July 2, 2011, cash and cash equivalents and short-term investments were $51.6 million compared with $87.5 million as of January 1, 2011. Shareholders' equity at the end of second quarter was $267.9 million compared with $255.4 million in the year-ago quarter.

CRA International currently has no long-term debt liability with the retirement of the remaining $21.9 million senior subordinated debentures during the quarter.

Outlook

CRA International remains optimistic about the second half of 2011 based on the solid results in the first half of 2011.

Our Take

Litigation and management consulting related areas continue to remain robust in the first half of 2011 and we believe the company’s growth initiatives, new business wins and healthy cash balance will help drive positive results in the long term. Moreover, we expect the estimates to go up based on better-than-expected quarterly results and management’s expectation of significant upside going forward.

The Zacks Consensus EPS estimates for 2011 and 2012 are pegged at $1.48 and $1.72, respectively.

One of CRA International’s prime competitors, FTI Consulting Inc (FCN - Analyst Report), will release its second quarter earnings on August 4, 2011.

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Read the full analyst report on FCN