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FTI Consulting Slips to Strong Sell

Zacks Equity Research

On Feb 26, Zacks Investment Research downgraded management services provider FTI Consulting, Inc. (FCN) to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #4 (Sell) primarily due to downward estimate revisions and a fall in the share price following its fourth quarter earnings release.

FTI Consulting’s share prices have gone downhill since Feb 18. Despite the downtrend, the company still has the potential to drive the stock up. The stock is currently trading at a forward P/E of 15.0x and has a long-term earnings growth expectation of 13.5%.

Why the Downgrade?

Over the last 7 days, most of the earnings estimates for FTI Consulting have been revised downward for first quarter 2014 as well as for the full year. This seems to be an aftereffect of a slightly bearish outlook for the ongoing quarter. Moreover, adjusted segment EBITDA margin for 2014 and beyond is expected to decline by 400 basis points to 500 basis points year over year.

Share prices have dropped following the fourth quarter earnings release, as adjusted earnings decreased year over year. Non-GAAP net income was $19.8 million or 49 cents per share in the fourth quarter of 2013 versus $27.4 million or 67 cents a share in the prior-year quarter. Adjusted EBITDA decreased to $53.0 million from $68.1 million in the year-ago quarter.

FTI Consulting anticipates flat to slightly increasing revenue in its Forensic and Litigation Consulting segment in the first quarter of 2014 compared with the sequentially preceding quarter. Revenues in the Strategic Communications segment are expected to be down in the mid-single-digit percentages on a sequential basis due to the continued challenging capital markets and pricing pressure.

For first quarter 2014, FTI expects adjusted earnings in the range of 20 cents to 28 cents per share. The current Zacks Consensus Estimate for the ongoing quarter is pegged at 27 cents, which represent a year-over-year decrease of 54.9%. These factors have cumulatively lowered expectations from the company, thereby leading to the least possible Zacks Rank.

Other Stocks to Consider

Other stocks that look promising and are worth looking into now include CBIZ, Inc. (CBZ),  with a Zacks Rank #1 (Strong Buy), and Bureau Veritas SA  (BVRDF) and Huron Consulting Group Inc. (HURN), both with a Zacks Rank #2 (Buy).

Read the Full Research Report on FCN
Read the Full Research Report on HURN
Read the Full Research Report on BVRDF
Read the Full Research Report on CBZ

Zacks Investment Research