Solid Quarter for FTI Consulting

FTI Consulting Inc.’s ( FCN - Analyst Report ) fourth quarter 2011 adjusted earnings of 70 cents per share surpassed the Zacks Consensus Estimate of 67 cents and were 34.6% higher than the year-ago quarter. Including the revaluation gain of 23 cents, earnings came in at 93 cents per share. In fiscal 2011, earnings were $2.39 per share versus $1.38 in the prior year.

Total revenue in the reported quarter jumped 9.8% year over year to $390.7 million. The upside in revenue was driven by solid performance of Economics, Technology and Forensic and Litigation consulting. Geographically, the company witnessed solid results in Asia-Pacific (up 72%), Latin America (up 84%) and EMEA (up 26%). In fiscal 2011, revenue increased 11.8% to $1.57 billion year over year.

Adjusted EBITDA during the quarter was up 22% to $80.9 million from $66.3 million in the year-ago quarter.

Segment Details

Despite reporting positive results on a year-over-year basis for the first time in six quarters, Corporate Finance/Restructuring segment revenue again declined in the reported quarter. The segment revenue decreased 4.3% year over year to $108.4 million in the fourth quarter due to reduced demand for restructuring services, partially offset by growth in the healthcare practices and contributions from the European tax acquired from LECG.

Forensic and Litigation Consulting revenue grew 11.1% year over year to $90.0 million. This upside in revenue was attributable to growth in data analytics practice, increased demand for construction solutions, forensic accounting and litigation support services in the Asia-Pacific region and contribution from the acquisition of LECG practices.

Technology segment reported revenues of $53.6 million, up 12.3% year over year. The segment benefited from higher litigation and mergers, acquisition activity, increased investigation matters and several large client assignments. The increase in revenue was partially offset by lower direct licensing revenue.

Economic Consulting revenues surged 39.1% year over year to $89.6 million in the quarter aided by strong demand for financial economics and growth in its antitrust and M&A practice.The acquisition of LECG practices also contributed to the growth in the segment.

Strategic Communications revenues dipped 1.4% year over year to $49.2 million in the quarter, due to the ongoing sluggish capital market activity.

Financials

For 2011, FTI Consulting’s cash and cash equivalents (excluding restricted cash) totaled $264.4 million, compared with $384.6 million as of December 31, 2010. Shareholders’ equity totaled $1,106.2 million as of December 31, 2011, compared with $1,167.6 million as of December 31, 2010.

Guidance

The company expects total revenue between $1.60 billion and $1.72 billion and diluted earnings per share in the range of $2.80 to $3.00 for 2012.

Our Take

We expect estimates to move up in the coming days based on the solid fourth quarter results, positive outlook and growth opportunities in both emerging and developed markets. FTI results also benefited from the addition of LECG professionals, which continues to enhance the company’s geographic reach and client base. Furthermore, FTI remains focused on expansion through acquisitions and the completion of one brand strategy will likely enhance its brand recognition. However, the sluggish revenue growth in the Corporate/Restructuring segment, which turnaround to positive in the reported quarter, was disappointing. The Zacks Consensus Estimates for 2012 are pegged at $2.90.

FTI Consulting competes mainly with CRA International Inc. ( CRAI - Analyst Report ) and Navigant Consulting Inc. ( NCI - Analyst Report ) . FTI Consulting currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. We are also maintaining our long-term “Neutral” recommendation on the stock.