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FTI Consulting (FCN) Beats Q3 Earnings and Revenue Estimates

Zacks Equity Research

FTI Consulting FCN delivered solid third-quarter 2019 results, with both earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of $1.63 beat the Zacks Consensus Estimate by 60 cents and increased 63% on a year-over-year basis. The bottom line benefited from strong operating performance by the company’s Corporate Finance & Restructuring, and Forensic and Litigation Consulting segments.

Total revenues of $593.1 million beat the consensus mark by $53 million and increased 15.6% year over year. The increase was driven by higher demand across all business segments.

Shares of the company have gained a massive 61.5% year to date, significantly outperforming the 25.7% rally of the industry it belongs to.

Let’s check the numbers in detail.

Revenues by Segment

Corporate Finance & Restructuring segment revenues increased 41.6% year over year to $191.7 million. The upside was driven by higher demand for restructuring and business transformation and transactions services. The segment contributed 32% to total revenues.

Forensic and Litigation Consulting segment revenues increased 12.6% year over year to $142.7 million. The improvement came on the back of higher demand for disputes and investigations services. The segment contributed 24% to total revenues.

Strategic Communications segment revenues increased 8.9% year over year to $60 million. The upside was driven by increase in project-based revenues in North America and EMEA, primarily associated with corporate reputation services. The segment contributed 10% to total revenues.

Economic Consulting segment revenues increased 1.8% year over year to $141.7 million. The increase was supported by higher demand for non-merger and acquisition-related antitrust services. The segment contributed 24% to total revenues.

Technology segment revenues rose 0.7% year over year to $57.1 million. The increase was driven by higher demand for global cross-border investigations and litigation services, offset by lower demand for merger and acquisition-related “second request” services. The segment contributed 10% to total revenues.

Operating Results

Adjusted EBITDA came in at $92.3 million, up 37% on a year-over-year basis. The increase was driven by higher revenues in Corporate Finance & Restructuring, and Forensic and Litigation Consulting segments, partially offset by an increase in compensation expenses and selling, general and administrative (SG&A) expenses.

Balance Sheet and Cash Flow

FTI Consulting exited the quarter with cash and cash equivalents of $258.5 million compared with $189.1 million in the prior quarter. Long-term debt was $273.1 million compared with $290.5 million at the end of the prior quarter.

The company generated $131.3 million of net cash from operating activities and capex was $6.4 million in the quarter. It spent $7.7 million to repurchase 90,848 shares in the quarter.

2019 Guidance

Management raised adjusted EPS and revenue guidance for the year. Adjusted EPS is now anticipated in the range of $5.75 to $6.00 compared with the previous guidance of $5-$5.50. The mid-point ($5.88) of the revised guided range is higher than the Zacks Consensus Estimate of $5.42.

Management now expects revenues in the range of $2.250 billion to $2.300 billion, compared with the previous guidance of $2.175-$2.250 billion.

Zacks Rank & Other Stocks to Consider

Currently, FTI Consulting carries a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the broader Zacks Business Services sector are FleetCor FLT, S&P Global SPGI and Paychex PAYX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings (three to five years) growth rate for FleetCor, S&P Global and Paychex is estimated at 15.6%, 10% and 7%, respectively.

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