A month has gone by since the last earnings report for FTI Consulting (FCN). Shares have added about 1.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is FTI Consulting due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
FTI Consulting Beats Q4 Earnings and Revenues Estimates
FTI Consulting 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.
Revenues by Segment
Corporate Finance & Restructuring segment 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.
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.
Management expects revenues in the range of $2.00-$2.10 billion. Adjusted EPS is anticipated in the range of $3.50-$4.00.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months.
At this time, FTI Consulting has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
FTI Consulting has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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