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CRA International (CRAI)

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Following the footsteps of the previous-quarter results, CRA International's (CRAI) second quarter 2012 results were also discouraging. The earnings lagged the Zacks Consensus Estimate significantly, owing to the weak performance of its management consulting business, partially offset by healthy litigation business.

As a result of the soft consulting business, all key-line items experienced a downside. The management consulting business suffered because of poor performance of the Chemicals practice and Middle East operations. Although management is undertaking restructuring actions to improve profitability and boost performance, we remain concerned about the ongoing economic uncertainty in Europe, cautious spending by clients, stiff competition and currency fluctuations.

Hence, we reiterate our Underperform stance on the stock. Our six-month target price of $14.00 per share equates to about 16.5x our earnings estimate for 2012. With no dividend to supplement, this target price implies a negative return of 11.7% over that period.

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