Navigant's Earnings Excel Estimate

Zacks

Management services provider Navigant Consulting Inc. (NCI) reported strong first quarter 2013 results with a net income of $13.8 million or 27 cents per share compared with $11.6 million or 22 cents in the year-earlier quarter. Earnings per share for the reported quarter increased 23% year over year and also exceeded the Zacks Consensus Estimate by 3 cents.

Total revenue was up 3.9% year over year to $214.8 million, while revenues before reimbursements (:RBR) marginally increased to $187.3 million. EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter rose 11.9% to $30.1 million from $26.9 million in the year-ago quarter. Adjusted EBITDA was up 8% year over year to $29.9 million, due to increased operating profit from three segments and a 9% reduction in general and administrative expenses, partially offset by a decline in operating profit from the Disputes, Investigations & Economics segment.

Segment Performance

The Healthcare segment's revenues rose 20.2% year over year to $49.2 million in first quarter 2013, driven by strong demand in the field of healthcare as well as life science practices. The Energy segment revenues grew 19.1% to $29.5 million, aided by increased energy-efficient engagements, a newly found large reserve for economically viable domestic shale gas, rise in environmental pressures and uncertainty of regulatory outcomes.

Disputes, Investigations & Economics segment revenues decreased 14.0% year over year to $83.5 million, primarily due to the divestiture of the Economics business. Financial, Risk & Compliance Advisory segment registered a 20.0% year-over-year rise in revenues to $52.6 million, propelled by several large mortgage servicing review engagements.

Liquidity

At quarter-end, Navigant had $2.9 million in cash and cash equivalents. Free cash flow increased 66% year over year to $21.8 million (excluding $15.6 million received from the divesture of a portion of the Economics practice), while long-term debt was down $22.4 million or 12% from year-earlier levels. In addition, Navigant had approximately $205 million available under its credit facility.

The company repurchased 513,200 shares during first quarter 2013 for $6.2 million at an average price of $12.07 per share.

Outlook

For full year 2013, Navigant reiterated its earlier guidance of total revenue in the range of $820 million to $880 million. Adjusted earnings per share are expected in the range of 95 cents to $1.10.

We remain encouraged by the healthy earnings projection of Navigant, which currently retains a Zacks Rank #2 (Buy). Other players in the industry include Exponent Inc. (EXPO), Franklin Covey Co. (FC), and Huron Consulting Group Inc. (HURN), each carrying a Zacks Rank #2 (Buy).

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