It has been about a month since the last earnings report for
FTI Consulting, Inc. ( FCN - Free Report) . Shares have added about 9.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is FCN 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 Q1 Earnings Top Estimates, View Intact
FTI Consulting reported strong first-quarter 2018 results with revenues and earnings surpassing the Zacks Consensus Estimate.
FTI Consulting reported earnings per share of $1.04 in first-quarter 2018 compared with 34 cents in the year-ago quarter. Moreover, the company’s bottom line also surpassed the Zacks Consensus Estimate of 65 cents. The bottom-line growth can be attributed to higher revenue growth, operational efficiency and the U.S. tax reform that decreased the company’s effective tax rate to 28.2% from 36% in the year-ago quarter.
Total first-quarter 2018 revenues of $497.77 million beat the Zacks Consensus Estimate of $456 million. The figure was up 11.5% year over year. The top line benefited from strength across Corporate Finance and Restructuring, Forensic and Litigation Consulting and Strategic Communications segments.
Revenues by Segment Corporate Finance & Restructuring segment revenues increased 35.0% year over year to $142.9 million. Higher demand for restructuring, business transformation and transaction services drove segment revenues. It accounted for 28.7% of total revenues. Forensic and Litigation Consulting segment revenues increased 14.9% year over year to $128.0 million. Segment revenues grew on the back of higher demand for construction solutions, global investigations and health solutions services. It contributed 25.7% of total revenues. Strategic Communications segment revenues 20.7% year over year to $52.8 million. Higher retained revenues from public affairs and corporate reputation services in Europe, the Middle East and Africa boosted segment revenues. It accounted for 10.6% of total revenues. Economic Consulting segment revenues decreased 4.4% year over year to $133.1 million. The decrease in revenues was due to lower demand for antitrust services in North America. It contributed 26.7% of total revenues. Technology segment revenues decreased 11.2% year over year to $40.9 million. The decline was due to lower demand for managed review services. It accounted for 8.2% of total revenues. Operating Results Adjusted EBITDA & Margins
Adjusted EBITDA in first-quarter 2018 came in at $72.3 million compared with $38.3 million in the prior-year quarter. Adjusted EBITDA margin was 14.5% in the first quarter of 2018 compared with 8.6% in the year-ago quarter.
Adjusted EBITDA margin for Corporate Finance & Restructuring was 24.4% in first-quarter 2018 compared with 9.7% in the year-ago quarter. Adjusted EBITDA margin for Forensic and Litigation Consulting was 20.1% in first-quarter 2018 compared with 12.1% in the year-ago quarter. Adjusted EBITDA margin for Strategic Communications was 18.7% in first-quarter 2018 compared with 9.7% in the year-ago quarter. Adjusted EBITDA margin for Economic Consulting in first-quarter 2018 was 14.4%, flat with the year-ago quarter. Adjusted EBITDA margin for Technology was 14% in first-quarter 2018 compared with 16.9% in the year-ago quarter.
Operating income in first-quarter 2018 was $62.3 million compared with $27.1 million in the year-ago quarter. Operating margin was 12.5% compared with 6.1% in the year-ago quarter.
Balance Sheet and Cash Flow
FTI Consulting exited first-quarter 2018 with cash and cash equivalents of $152.04 million compared with $120.96 million in the year-ago quarter. As of Mar 31, 2018, long-term debt was $441.47 million compared with $396.28 million at the end of 2017.
The company used $69.2 million of cash in operating activities in the reported quarter compared with $93.1 million in the year-ago quarter. The year-over-year reduction in cash usage in operating activities resulted from the increase in cash collections.
During the reported quarter, FTI Consulting repurchased 337,075 shares for $14.2 million. As of Mar 31, 2018, the company had almost $99.1 million available for share buyback under its $300 million share repurchase authorization.
FTI Consulting reaffirmed its target for 2018. The company expects revenues to be in the range of $1.825-$1.875 billion. Current year earnings is expected to be between $2.35 and $2.65. Further, the company expects effective tax rate to be between 28% and 31% for the remainder of 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
At this time, FCN has a subpar Growth Score of D, a grade with the same score on the momentum front. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, FCN has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.