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FTI Consulting (FCN) Q4 Earnings and Revenues Top Estimates

Zacks Equity Research

FTI Consulting, Inc. FCN delivered strong fourth-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of $83 cents beat the Zacks Consensus Estimate by 32 cents and increased 6.4% on a year-over-year basis. The bottom line benefited from strong operating performance.

Total revenues of $505 million beat the consensus mark by $45 million and increased 8% year over year. The top line benefited from strength across all business segments.

Notably, shares of the company have surged 57% in the past year compared with 5.3% rise of the industry it belongs to.

Let’s check the numbers in detail.

Revenues by Segment

Corporate Finance & Restructuringsegment revenues increased 10.9% year over year to $144.8 million. The upside was driven by higher demand for business transformation and transactions services. The segment contributed 29% to total revenues.

Forensic and Litigation Consulting segment revenues increased 9.3% year over year to $132.1 million. The figure improved on the back of higher demand for construction solutions and dispute services. The segment contributed 26% to total revenues.

Strategic Communications segment revenues increased 6.7% year over year to $58 million. The uptick can be attributed to increase in retainer- and project-based revenues, primarily associated with public affairs as well as merger and acquisition-related services. The segment contributed 12% to total revenues.

Economic Consulting segment revenues increased 6.1% year over year to $128.4 million. The figure improved on the back of higher demand for antitrust and financial economics services.  The segment contributed 25% to total revenues.

Technology segment revenues increased 2% year over year to $41.7 million. The increase was driven by higher demand for consulting services, primarily associated with information governance, privacy and security services. However, the upside was partially offset by $2.8-million decline in licensing revenues related to the Ringtail divestiture. The segment contributed 8% to total revenues.

Operating Results

Adjusted EBITDA came in at $53.7 million, down 3.2% on a year-over-year basis. The downside was due to increase in higher compensation and other selling, general and administrative expenses (SG&A) expenses.  Adjusted EBITDA margin declined to 10.6% from 11.9% in the prior-year quarter.

Segment-wise, adjusted EBITDA margin for Corporate Finance & Restructuring declined to 16.8% from 19.7% in the year-ago quarter. Forensic and Litigation Consulting adjusted EBITDA margin decreased to 16.3% from 19.5% in the prior-year quarter. The same for Strategic Communications was 19.5% compared with 19.4% in the year-ago quarter. Economic Consulting adjusted EBITDA margin fell to 9.4% from 11.8% in the prior-year quarter. The same for Technology declined to 6.4% from 7.3% in the year-ago quarter.

Operating income came in at $44.8 million, up 29.8% from the prior-year quarter. Operating margin rose to 8.9% from 7.4% in the year-ago quarter. 

Balance Sheet and Cash Flow

FTI Consulting exited fourth-quarter 2018 with cash and cash equivalents of $312.1 million compared with $505.9 million in the prior quarter. Long-term debt was $265.6 million compared with $263.3 million at the end of the prior quarter.

The company generated $144.4 million of net cash from operating activities and spent $4.4 million in capex in the quarter. It spent $26.5 million to repurchase 418,728 shares in the quarter.

2019 Guidance

Management expects revenues in the range of $2.00-$2.10 billion, the mid-point ($2.05 billion) of which is higher than the Zacks Consensus Estimate of $2.01 billion.

Adjusted EPS is anticipated in the range of $3.50-$4.00, the mid-point ($3.75) of which is lower than the Zacks Consensus Estimate of $3.77.

Zacks Rank & Upcoming Releases

FTI Consulting currently sports 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 Zacks Business Services sector are keenly awaiting reports of key players like Charles River Associates CRAI, Stericycle SRCL and FactSet FDS. While Charles River Associates and Stericycle will release fourth-quarter 2018 results on Feb 28, FactSet will post second-quarter fiscal 2019 results on Mar 26.

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