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Why Is FTI Consulting (FCN) Up 19.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for FTI Consulting (FCN - Free Report) . Shares have added about 19.8% 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 drivers.

FTI Consulting Q4 Earnings Tops Estimates

FTI Consulting delivered impressive fourth-quarter 2020 results, with both earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of $1.61 (excluding 4 cents from non-recurring item) surpassed the Zacks Consensus Estimate by 43.8% and increased more than 100% on a year-over-year basis. The bottom line was positively impacted by decline in selling, general and administrative expenses, and higher revenues and lower effective tax rate.

Total revenues of $626.6 million beat consensus mark by 3.5% and increased 4% on a year-over-year basis. This increase was driven by higher demand in the Corporate Finance & Restructuring, and Economic Consulting and Technology segments, partially offset by lower demand in the Forensic and Litigation Consulting, and Strategic Communications segments.

Revenues by Segment

Corporate Finance & Restructuring’s revenues jumped 21.4% year over year to $219.8 million. The upside was driven by solid demand for restructuring services and rise in success fee. The segment contributed 35% to total revenues.

Forensic and Litigation Consulting’s revenues declined 15.4% year over year to $127.2 million. The decrease in revenues was primarily due to lower demand for disputes and investigations services. The segment contributed 20% to total revenues.

Strategic Communications’ revenues declined 8.8% year over year to $60.5 million. This downtick was due to a $4.8 million decline in pass-through revenues. The segment contributed 10% to total revenues.

Technology’s revenues increased 13.8% year over year to $58.6 million. The upside resulted from higher demand for mergers and acquisitions (M&A) related "second request" and litigation services. The segment contributed 9% to total revenues.

Economic Consulting’s revenues were up 4.9% year over year to $160.5 million. The growth was due to higher demand and realized bill rates for M&A and non M&A related antitrust services, partially offset by lower demand for financial economics services. The segment contributed 26% to total revenues.

Operating Results

Adjusted EBITDA was $82.3 million, up 41.2% on a year-over-year basis. Adjusted EBITDA margin expanded 340 basis points year over year to 13.1%.

Balance Sheet and Cash Flow

FTI Consulting exited the quarter with cash and cash equivalents of $295 million compared with the prior quarter’s $304.7 million. Long-term debt was $286.1 million compared with $308.5 million witnessed at the end of the previous quarter. The company generated $186.1 million of net cash from operating activities and CapEx was $9.2 million. It spent $169.2 million to repurchase 1,598,540 shares during this period.

2021 Guidance

The company expects 2021 revenues to be between $2.575 billion and $2.7 billion. Adjusted EPS is expected between $5.80 and $6.50.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -14.8% due to these changes.

VGM Scores

Currently, FTI Consulting has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, FTI Consulting has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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