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Navigant (NCI) Q2 Earnings Miss, Stock Falls on Guidance Cut

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Management consulting service provider Navigant Consulting, Inc. (NCI - Free Report) reported lackluster second-quarter 2017 results with adjusted earnings per share of 24 cents compared with 33 cents in the prior-year quarter. Adjusted earnings missed the Zacks Consensus Estimate by 9 cents. Adjusted net income declined to $11.5 million from $16.1 million in the year-ago quarter. The results were affected by lower revenues and maintenance of resources on expectations of a superior demand environment in the second half of the year. Consequently, shares were down significantly following the earnings release by 14.4%, to close at $16.93 yesterday.

GAAP earnings for the reported quarter were $8.8 million or 18 cents per share compared with $14.8 million or 30 cents per share in the year-earlier quarter. 

Total revenues for the quarter were $256.8 million compared with $261.7 million in the prior-year period. Revenues before reimbursements (RBR) decreased 1.4% year over year to approximately $235.2 million and missed the Zacks Consensus Estimate of $248.3 million. Adjusted EBITDA was $29.2 million, down 21% from $37.2 million for the same period in 2016 largely due to high operating expenses.  

Navigant Consulting, Inc. Price, Consensus and EPS Surprise

Navigant Consulting, Inc. Price, Consensus and EPS Surprise | Navigant Consulting, Inc. Quote

Segment Performance

RBR for the Healthcare segment, which turned out to be one of the strongest performers this quarter, increased 4.7% year over year to $94.1 million. The improvement was driven by strong demand for large, strategy-led transformation projects and demand for commercialization solutions from life sciences companies.

The Energy segment’s RBR grew 8.4% year over year to $31.7 million in the reported quarter. The growth was driven by contributions from the acquisition of Ecofys. Operating profit for the segment increased 1.4% year over year to $8.5 million.

The Disputes, Forensics & Legal Technology (earlier known as Disputes, Investigations & Economics) segment’s RBR decreased 4.6% year over year to $75.7 million. The decline was primarily attributable to weakness in commercial litigation opportunities and a postponement of commencementdates for certain engagements in the segment’s legal technology solutions business.  

The Financial, Risk & Compliance Advisory segment’s RBR declined 15.8% year over year to $33.7 million in the quarter. Operating profit for the segment was down 29.7% year over year, as resources and capabilities were maintained in hopes of improving demand.

Balance Sheet and Cash Flow

As of Jun 30, 2017, Navigant had cash and cash equivalents of about $6.6 million. At quarter end, bank debt was $184.8 million, compared with $189.8 million in the year-ago period. Leverage (bank debt divided by trailing twelve-month adjusted EBITDA) was 1.37 as of Jun 30, 2017, compared with 1.46 as of Jun 30, 2016.

For the quarter, net cash provided by operating activities was $21.3 million compared with $34.2 million in the year-ago quarter, due to a decline in earnings. Free cash flow decreased to $13.5 million in second-quarter 2017 from $24.4 million in the prior-year quarter, primarily driven by an increase in capital investment spending. Navigant repurchased 436,122 shares for approximately $9 million at an average cost of $20.62 per share. 

2017 Guidance

The company currently projects RBR in the range $955–$980 million compared with $975–$1,010 million estimated earlier. Total revenues are expected in the range of $1.04–$1.07 billion (down from $1.07 million to $1.11 billion earlier). Adjusted EBITDA is expected in the range of $135–$145 million ($145–$156 million expected earlier), while adjusted earnings per share are expected in the band of $1.19–$1.29.  

Navigant currently sports carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks from the broader sector are Atento S.A. (ATTO - Free Report) , Brink's Company (BCO - Free Report) and Gartner, Inc. (IT - Free Report) .

Atento delivered an average positive earnings surprise of 27.81% in the last four quarters. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brink's Company, with a Zacks Rank #1, delivered an average positive earnings surprise of 23.44% in the last four quarters.

Gartner, with a Zacks Rank #2 (Buy) came up with an average positive earnings surprise of 4.58% for the last four quarters.   

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