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Why Is Navigant (NCI) Up 15.9% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Navigant Consulting, Inc. (NCI - Free Report) . Shares have added about 15.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is NCI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Navigant Consulting reported decent first-quarter 2018 results, wherein the company’s bottom line met the Zacks Consensus Estimate and the top line surpassed the same.

Adjusted earnings per share came in at 30 cents compared with 27 cents in the year-ago quarter. The bottom line benefitted from lower tax rates (as a result of Tax Cuts and Jobs Act) and reduced depreciation and amortization expenses.

Total revenues were $264.5 million compared with $257.8 million in the prior-year period. Revenues before reimbursements (RBR) were $243.9 million compared with $236.2 million in the prior-year period. Revenues before reimbursements beat the Zacks Consensus Estimate of $234 million. Strength across Energy, Financial, Risk & Compliance Advisory and Disputes, Forensics & Legal Technology segments drove top-line growth.

Revenues by Segment

Energy segment RBR increased 3.7% year over year to $33.7 million. Segment revenues were driven by higher demand from commercial client engagements for services such as grid modernization and distributed energy resource planning.

Financial Services Advisory and Compliance RBR increased 25.8% year over year to $41.4 million. Segment revenues were driven by increased activity in financial crime, sanctions, and operational efficiency engagements across its major clients.

Disputes, Forensics, and Legal Technology segment RBR increased 2.3% year over year to $78.6. Continuous demand for cyber security services and robust market for commercial disputes expertise drove the segment revenues.

Healthcare segment RBR decreased 4% year over year to $90.1 million. Reduced demand for large transformational engagements weighed on segment revenues.

Operating Results

Adjusted EBITDA in first-quarter 2018 came in at $29.9 million compared with $31.5 million in the prior-year quarter. Operating income was $75.1 million compared with $74.4 million in the year-ago quarter. Depreciation expenses declined 8.4% year over year to $6,845 million. Amortization expenses declined 19.9% from the year-ago quarter to $1,856 million. General and administrative expenses rose 6.9% from the year-ago quarter to $44,362 million.

Operating margin (in terms of RBR) was 30.8% compared with 31.5% in the year-ago quarter. Operating margin for Energy segment was 31.8% compared with 27.3% in the year-ago quarter. Operating margin for Financial Services Advisory and Compliance was 38.7% compared with 35.3% in the year-ago quarter. Operating margin for Disputes, Forensics, and Legal Technologywas 35.5% compared with 33.2% in the year-ago quarter. Operating margin for Healthcare segment was 22.6% compared with 30.3% in the year-ago quarter.

Balance Sheet and Cash Flow

Navigant exited first-quarter 2018 with cash and cash equivalents of $6.65 million compared with $9.13 million in the year-ago quarter. As of Mar 31, 2018, bank debt was $184.3 million compared with $133 million at the end of December 2017. Leverage (bank debt divided by trailing 12-month adjusted EBITDA) was 1.48 compared with 1.06 as of Dec 31, 2017.

The company used $34.8 million of cash in operating activities in the reported quarter compared with $22.9 million in the year-ago quarter. Free cash flow was $20.1 million in the reported quarter compared with $13.3 million in the year-ago quarter.

During the reported quarter, the company repurchased almost 569,000 shares at an aggregate cost of $11.4 million and an average price of $19.95 per share.As of Mar 31, 2018, the company had $52.3 million available under its share repurchase authorization, which will expire on Dec 31, 2019.

2018 Outlook

Navigant reaffirmed its guidance for 2018.The company expects total revenues to be in the range of $1.030-$1.065 billion. Revenues before reimbursements are expected to be between $940 million and $975 million. Current year earnings per share are expected to be between $1.26 and $1.44. Further, the company expects free cash flow between $75 million to $90 million. Adjusted EBITDA is anticipated in the range of $125 million to $137 million. Capital expenditures are estimated to be around $25 million. Notably, the company expects to increase its RBR at an annual growth rate of 6-8% (on an organic basis) for the period 2018-2022.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

Navigant Consulting, Inc. Price and Consensus

 

VGM Scores

At this time, NCI has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

The company's stock is suitable solely for value based on our styles scores.

Outlook

NCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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