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FTI Consulting (FCN) Q2 Earnings Top Estimates, '18 View Up

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FTI Consulting, Inc. (FCN - Free Report) reported strong second-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Earnings per share came in at $1.14 compared with 40 cents in the year-ago quarter. The company’s bottom line surpassed the Zacks Consensus Estimate of 63 cents.

Higher operating profit and lower effective income tax rate boosted the bottom line. Notably, the company enjoyed a lower effective tax rate of 24.4% compared with 37.8% in the year-ago quarter. The reduced tax rate was a result of the tax reform policy (Tax Cuts and Jobs Act, which reduced corporate tax rates significantly from 35% to 21%) and benefit from certain discrete tax items recorded in the reported quarter (related to changes in certain state tax law).

Total second-quarter 2018 revenues of $512.1 million beat the consensus mark by $48.8 million and increased 15.2% year over year. The top line benefited from strength across Corporate Finance & Restructuring, Forensic and Litigation Consulting, Strategic Communications and Economic Consulting segments.

So far this year, shares of FTI Consulting have gained 79.3%, significantly outperforming the industry’s 7.8% rally.

 

Let’s check out the numbers in detail.

Revenues by Segment

Corporate Finance & Restructuring segment revenues increased 20.3% year over year to $141.4 million. Higher demand for restructuring and business transformation services in North America and Europe, the Middle East and Africa regions drove segment revenues. The segment accounted for 28% of total revenues.

Forensic and Litigation Consulting segment revenues increased 19.9% year over year to $133.5 million. Segment revenues grew on the back of higher demand for investigations and construction solutions services. The segment contributed 26% to total revenues.

Strategic Communications segment revenues increased 24.3% year over year to $57.5 million. Growth across project- and retainer-based revenues related to financial communications and public affairs practices boosted segment revenues. The segment accounted for 11% of total revenues.

Economic Consulting segment revenues increased 7.5% year over year to $133.3 million. Segment revenues grew on the back of higher demand for financial economics and international arbitration services, which was partially offset by lower realization for antitrust services.  The segment contributed 26% to total revenues.

Technology segment revenues increased 1.9% year over year to $46.4 million. The increase was driven by higher demand for consulting and hosting services, which was partially offset by lower demand for managed review services related to a decline in merger and acquisition related “second requests” and global investigations. The segment accounted for 9% of total revenues.

Operating Results

Adjusted EBITDA came in at $72.4 million, up 77.4% on a year-over-year basis. The increase was driven by higher revenues and improved utilization. Adjusted EBITDA margin rose to 14.1% from 9.2% in the prior-year quarter. 

Segment-wise, adjusted EBITDA margin for Corporate Finance & Restructuring rose to 25.3% from 17.1% in the year-ago quarter. Forensic and Litigation Consulting adjusted EBITDA margin increased to 20.7% from 11.7% in the prior-year quarter. The same for Strategic Communications was 19.1% compared with 10.5% in the year-ago quarter. While Economic Consulting adjusted EBITDA margin declined to 11.6% from 12.5% in the prior-year quarter, the same for Technology rose to 16.2% from 11.9% in the year-ago quarter.

Operating income came in at $61.8 million compared with $29 million in the prior-year quarter. Operating margin rose to 12.1% from 6.5% in the year-ago quarter. 

Balance Sheet and Cash Flow

FTI Consulting exited second-quarter 2018 with cash and cash equivalents of $116.6 million compared with $152 million in the prior quarter. Long-term debt was $371.7 million compared with $441.5 million at the end of prior quarter.

The company generated $34.6 million of net cash from operating activities compared with $10.9 million in the year-ago quarter. The year-over-year increase was driven by higher cash collections from increased revenues, which was, however, partially offset by higher income tax payments.

The company spent $8.54 million in capex in the quarter.

2018 Guidance

FTI Consulting raised its guidance for full-year 2018. The company now expects revenues in the range of $1.910-$1.960 billion, compared with $1.825-$1.875 billion expected earlier. The Zacks Consensus Estimate stands at $1.96 billion, which is in line with the higher end of the currently guided range.

Earnings per share are anticipated in the range of $2.90-$3.30, compared with $2.35-$2.65 expected earlier. The Zacks Consensus Estimate stands at $2.98, which lies well within the currently guided range.

Further, the company expects effective tax rate to be between 27% and 29% for the remainder of 2018, compared with 28% to 31% expected previously.

Zacks Rank & Upcoming Releases

FTI Consulting currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Investors interested in the  broader Business Services sector are keenly awaiting second-quarter earnings reports from key players like Avis Budget (CAR - Free Report) , Genpact (G - Free Report)   and Delphi Technologies (DLPH - Free Report) .  While Avis Budget and Genpact will report their quarterly numbers on Aug 7, Delphi Technologies will release results on Aug 8.

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