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Why Is Navigant (NCI) Down 2.1% Since the Last Earnings Report?

NCI

Trades from $3

It has been about a month since the last earnings report for Navigant Consulting, Inc. (NCI - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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.

Navigant Falters Despite Q4 Earnings, Revenue Beat

Navigant reported adjusted earnings per share (EPS) of $0.30 in fourth-quarter 2016 compared with $0.28 in the prior-year quarter. Adjusted earnings comfortably beat the Zacks Consensus Estimate of $0.26.

Total revenue for the quarter was $266.1 million compared with $232.6 million in the prior-year period. Revenues before reimbursements (RBR) increased 13% year over year to approximately $239.7 million, beating the Zacks Consensus Estimate of $235.7 million. Revenues increased due to strong demand in Financial Services Advisory, Compliance, Healthcare and Energy Segments.

Adjusted EBITDA was $34.8 million, up 13% from $30.9 million in the prior-year quarter.

For full-year 2016, the company reported adjusted earnings of $62 million or $1.27 per share compared with $52.6 million or $1.07 per share in the prior year. Revenues for the year were $1,034.5 million compared with $919.4 million a year ago. Adjusted EBITDA was $142.3 million, up 17.7% from $120.9 million in the prior year.

Segmental Performance

RBR for the Healthcare segment, which turned out to be one of the strongest performers this quarter, increased 20.5% year over year to $91.7 million. The improvement was driven by strong demand for large, strategy-led transformation projects.

The Energy segment’s RBR saw growth of 13.8% year over year to $31.3 million in the reported quarter. The growth was primarily driven by contributions from the Ecofys acquisition. The segment’s operating profit margin was 29.3%, flat compared with the year-ago quarter.

The Disputes, Forensics & Legal Technology (earlier known as Disputes, Investigations & Economics) segment’s RBR increased 2.1% year over year to $78.4 million. The rise was primarily driven by the continued strong demand for its global expertise in complex industrial, infrastructure and commercial project matters and an increase in performance-based fees associated with mass tort claims work, partially offset by currency fluctuations. Segmental operating margin increased to 31.8% from 31.3%.

The Financial, Risk & Compliance Advisory segment’s RBR increased 21% year over year to $38.3 million in the quarter. Operating profit margin for the segment decreased to 38.6% from 39.5% in the year-earlier quarter due to higher RBR.

Balance Sheet and Cash Flow

As of Dec 31, 2016, Navigant had cash and cash equivalents of about $8.3 million compared with $8.9 million a year ago.

Bank debt was $135 million as of Dec 31, 2016, compared with $173.7 million as of Dec 31, 2015. Leverage (bank debt divided by trailing twelve-month adjusted EBITDA) was 0.95x at Dec 31, 2016, compared with 1.44x as of Dec 31, 2015.

For the year, net cash provided by operating activities was $110 million, compared with $83.1 million a year-ago, due to improved earnings. Free cash flow increased to $78.8 million for the year compared with $49 million in 2015, reflecting improved operating performance, decreased capital expenditures and a decline in deferred acquisition payments. Navigant repurchased 291,495 shares during the fourth quarter at an aggregate cost of $6.3 million and an average cost of $21.46 per share. For full-year 2016, the company repurchased approximately 1.4 million shares at an aggregate cost of $25.1 million and an average cost of $17.45 per share. As of Dec 31, 2016, approximately $63.0 million remained available under its share repurchase authorization.

2017 Outlook

Navigant offered its guidance for full-year 2017. RBR is expected to range between $975 million to $1 billion while total revenue is expected to be around $1.1 billion. Adjusted EBITDA for the full year  is expected to be in the range of $145−$156 million and adjusted EPS is estimated to be between $1.29 and $1.36.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. In the past month, the consensus estimate has shifted lower by 9.2% due to these changes.

VGM Scores

Currently, Navigant's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 20% 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.

Zacks' style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.




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