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FTI Consulting (FCN) Q2 Earnings Beats Estimates, Down Y/Y

Zacks Equity Research
·4 min read

FTI Consulting, Inc. FCN delivered better-than-expected second quarter 2020 results, with both earnings and revenue beating the Zacks Consensus Estimate.

Quarterly adjusted earnings per share (EPS) of $1.32 (excluding 5 cents from non-recurring item) surpassed the Zacks Consensus Estimate by 30.7% but declined 23.7% on a year-over-year basis. The bottom line was negatively impacted by an 18.2% increase in billable headcount, higher variable compensation partially offset by decline in selling, general and administrative expenses as well as lower effective tax rate.

Total revenues of $607.9 million beat the consensus mark by 7.9% and increased marginally on a year-over-year basis. This increase was driven by higher demand in the Corporate Finance & Restructuring segment, nearly muted by lower demand in the Forensic and Litigation Consulting and Technology business segments

Notably, FTI Consulting’s shares have rallied 17.8% in the past year compared with 18.4% growth of the industry it belongs to.

Let’s check the numbers in detail.

Revenues by Segment

Corporate Finance & Restructuring’s revenues jumped 29.5% year over year to $246 million. The upside was driven by solid demand for restructuring services. The segment contributed 40.5% to total revenues.

Forensic and LitigationConsulting’s revenues declined 27.1% year over year to $106.4 million. The decrease in revenues was primarily due to lower demand for investigations and disputes services. The segment contributed 17.5% to total revenues.

Strategic Communications’ revenues declined 3.8% year over year to $56.9 million. This downtick was due to a $1.9-million decline in pass-through revenues. The segment contributed 9.4% to total revenues.

FTI Consulting, Inc. Price, Consensus and EPS Surprise

FTI Consulting, Inc. Price, Consensus and EPS Surprise
FTI Consulting, Inc. Price, Consensus and EPS Surprise

FTI Consulting, Inc. price-consensus-eps-surprise-chart | FTI Consulting, Inc. Quote

Technology’s revenues dropped 15.4% year over year to $47.1 million. The downside resulted from lower demand for litigation and global cross-border investigation services as well as lower revenue from completion of transition services. The segment contributed 7.7% to total revenues.

Economic Consulting’s revenues fell 2.6% year over year to $151.1 million. The decline was due to lower demand for non-merger and acquisition-related antitrust, and financial economics services as well as lower realized rates for international arbitration services. The segment contributed 24.9% to total revenues.

Operating Results

Adjusted EBITDA was $75.8 million, down 22% on a year-over-year basis. Adjusted EBITDA margin contracted 350 basis points  year over year to 12.5%.

Balance Sheet and Cash Flow

FTI Consulting exited the second quarter with cash and cash equivalents of $304.2 million compared with the prior quarter’s $223.1 million. Long-term debt was $315.8 million compared with $328.2 million witnessed at the end of the previous quarter. The company generated $153 million of net cash from operating activities and CapEx was $5.2 million. It spent $51 million to repurchase 470,853 shares during this period.

FTI Consulting currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2020 Guidance Restored

FTI Consulting anticipates its full year 2020 Adjusted EPS in the range of $5.50-$6.00. The midpoint of the guidance ($5.75 per share) is above the Zacks Consensus Estimate, which is pegged at $5.61 per share. Revenues for 2020 is expected between $2.45 billion and $2.55 billion. The midpoint of the range ($2.5 billion) stands above the Zacks Consensus Estimate of $2.46 billion.

Performance of Other Business Services Companies

Equifax EFX reported better-than-expected second-quarter 2020 adjusted earnings of $1.60 per share, which beat the Zacks Consensus Estimate by 22.1% and improved 14.3% on a year-over-year basis.

IQVIA Holdings IQV reported second-quarter 2020 adjusted earnings per share of $1.18, which beat the consensus mark by 12.4% but fell 22.9% on a year-over-year basis.

Robert Half RHI reported second-quarter 2020 earnings of 41 cents per share beat the consensus mark by 17% but were down 58% year over year.

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