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ICF (ICFI) Up 2.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for ICF International (ICFI). Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ICF due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

ICF International Beats Q2 Earnings Estimate

ICF reported strong second-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

Non-GAAP EPS of 97 cents beat the consensus mark by 4 cents and improved 21.3% on a year-over-year basis driven by strong operating performance.  Revenues came in at $366.7 million, which outpaced the consensus mark by $10 million and increased 13.1% year over year. Disaster recovery programs, marketing services and energy efficiency implementation programs and higher revenues from U.S. federal government agency clients drove the top line.

Revenues in Detail

Revenues from government clients came in at $245.7 million and improved 17.8% year over year. U.S. federal government revenues of $141.2 million increased 1.2% year over year and contributed 38% to total revenues. U.S. state and local government revenues of $72.9 million surged more than 100% year over year and contributed 20% to total revenues. International government revenues of $31.7 million, down 8.4% year over year on a reported basis and 2.6% on a constant-currency basis, contributed 9% to total revenues. Commercial revenues totaled $121 million, up 4.6% from the year-ago quarter’s figure and contributed 33% to total revenues. Energy markets contributed 45% to commercial revenues and Marketing services contributed 46% to the same.

Backlog and Value of Contracts

Total backlog and funded backlog amounted to $2.4 billion and $1 billion at the end of the quarter, respectively. The total value of contracts awarded was $403.1 million, representing a trailing 12 month book-to-bill ratio of 1.15.

Operational Results

Adjusted EBITDA was $32.7 million, up 19.5% from the year-ago quarter’s figure, driven by favorable revenue mix, increased service revenue and higher utilization. Adjusted EBITDA margin was 13% of service revenues, up 110 basis points (bps) year over year.

Balance Sheet

At the end of the quarter, cash and cash equivalent balance was $6.3 million compared with $5.7 million at the end of the previous quarter. The company had a long-term debt of $288.5 million compared with $232.3 million at the end of the prior quarter. ICF International used $35.3 million of cash in operating activities and capex was $7million. The company purchased 126,000 shares for $9.4 million and paid out dividends of $2.6 million in the quarter.

2019 Outlook

ICF updated its guidance for the year. Management now expects total revenues between $1.475 billion and $1.5 billion, compared with the previous guidance of $1.45 billion and $1.50 billion. Non-GAAP EPS is expected in the range of $4.10 to $4.25, compared with the prior expectation of $4.05-$4.25.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, ICF has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, ICF has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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