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Boston, Massachusetts-based CRA International Inc. (CRAI - Analyst Report) reported pro forma earnings of 40 cents per share in the fourth quarter of 2011, handily beating both the Zacks Consensus Estimate of 31 cents per share and the year-ago quarter earnings of 35 cents per share.

Net earnings per share on a GAAP basis was 42 cents, which was substantially higher than the year-ago level of 17 cents.

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 third time in two years.

Adjusted total revenue grew 5.3% on sequential basis but fell 1.9% on year-over-year basis to $73.1 million. The sequential revenue growth was driven by solid performance of both Litigation and Management Consulting businesses and solid contribution from international operations. 

In 2011, the company reported adjusted earnings of $1.60 versus 87 cents in the prior year. Adjusted total revenue also climbed 6% to $299.1 million in 2011.

Quarter Performance 

CRA International generated 24% of the total revenue from the international market.

During the reported quarter, CRA International achieved a utilization rate of 74% based on broad-based improvement in demand for services.  

CRA International witnessed a sequential increase of more than 200 bps in gross margin to 35.4% while adjusted operating margin expanded to 10.0%, based on ongoing expense management initiatives and revenue growth.

Financial Position

As of December 31, 2011, cash and cash equivalents and short-term investments were $76.1 million compared with $87.5 million as of January 1, 2011. Shareholders' equity at the end of 2011 was $268.4 million compared with $255.4 million in the year-ago quarter. At the end of 2011, the company had no long-term debt liability. The company also has a credit facility of $60 million in place.

Outlook

For 2012, CRA International anticipates revenue growth of 6%, utilization rate in the range of low to mid 70’s and adjusted operating margin of 11%.

Our Take

Litigation and management consulting related areas continues to perform remarkably 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.

However, management remains cautious regarding slow consumer spending and ongoing economic uncertainty in Europe.

The Zacks Consensus EPS estimates for 2012 and 2013 are pegged at $1.73 and $1.85, respectively.

One of CRA International’s prime competitors, FTI Consulting Inc (FCN - Analyst Report) will release its fourth quarter earnings on February 24, 2012.

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