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FTI Consulting Rides on International Operations, Tax Cut

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FTI Consulting Rides on International Operations, Tax Cut

FTI Consulting's (FCN) international operation should help expand its geographic footprint and contribute to top-line growth.

FTI Consulting, Inc. FCN stock has rallied 74.4% on a year-to-date basis, outperforming the 12.4% rise of the industry it belongs to.

 

FTI Consulting reported strong second-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Earnings per share (EPS) came in at $1.14 compared with 40 cents in the year-ago quarter. The company’s bottom line surpassed the consensus mark of 63 cents. Total revenues of $512.1 million beat the consensus mark by $48.8 million and increased 15.2% year over year.

In the past 60 days, the Zacks Consensus Estimate for third-quarter EPS has been revised 9.6% upward while the same for full-year 2018 increased 23.4%.

What’s Driving FTI Consulting?

FTI Consulting looks strong on the back of its ability to club diverse issues like damage assessment, accounting, economics, statistics, finance and industry under a single platform. The company continues to pursue opportunities in areas such as business transformation services, transaction advisory business, restructuring, retail, construction, data and analytics, cyber business, information governance and international arbitration.

Additionally, increased regulatory scrutiny and increase in corporate litigation are likely to increase the demand for FTI Consulting’s products. Such productive efforts make it a preferred partner of global clients dealing with international arbitration issues, thereby generating continued revenue growth from the existing international operations. In second-quarter 2018, the company witnessed double-digit revenue growth across each of its regions of operation - North America, Asia Pacific, Europe, Middle East and Africa (“EMEA”) and United Kingdom (“UK”). This implies that FTI Consulting’s international expansion remains strong and will likely continue in the future as well.

Lower tax rates (as a result of Tax Cuts and Jobs Act, which reduced corporate tax rates significantly from 35% to 21%) have been contributing to FTI Consulting’s bottom line. The company’s second-quarter 2018 earnings benefited from a lower effective tax rate of 24.4%. In the prior-year quarter, the tax rate was 37.8%.  

Additionally, FTI Consulting raised its full-year 2018 earnings per share guidance to the range of $2.90-$3.30 from $2.35-$2.65 expected earlier. Effective tax rate is expected to be between 27% and 29% for the remainder of 2018, compared with 28% to 31% expected previously. Higher profits will open up more growth opportunities for the company and enable it return capital to shareholders.

In first half of 2018, FTI Consulting repurchased 337,075 shares for $14.2 million. As of Jun 30, 2018, the company had $99.1 million available under the share repurchase program for further share buyback. In 2017, 2016 and 2015, FTI Consulting repurchased shares worth $168 million, $21.5 million and $26.5 million, respectively. Such moves indicate the company’s commitment toward creating value for shareholders and underline its confidence in its business.

Zacks Rank & Other Stocks to Consider

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

Some other top-ranked stocks in the broader Business Services sector include CRA International CRAI, NV5 Global NVEE and Information Services Group III. While CRA International holds a Zacks Rank #1, NV5 Global and Information Services Group carry a Zacks Rank #2 (Buy).

CRA International, NV5 Global and Information Services Group have delivered an average four-quarter positive earnings surprise of 58.3%, 12.7% and 5.5%, respectively.

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