FTI Consulting (FCN) Misses Q2 Earnings, Revenues Decline

FTI Consulting (NYSE:FCN) reported dismal second-quarter 2017 results with adjusted earnings of $16.1 million or 40 cents per share compared with $27.6 million or 66 cents per share in the year-earlier quarter. Adjusted earnings missed the Zacks Consensus Estimate of 53 cents.

Revenues for the quarter declined 3.4% to $444.7 million and missed the Zacks Consensus Estimate of $455 million. Excluding the estimated negative impact of foreign currency translation, revenues decreased 1.6% year over year on lower demand for restructuring services in North America in the Corporate Finance & Restructuring segment.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the quarter was $40.8 million, down from $56.6 million in the prior-year quarter, owing to lower revenues and higher operating expenses.

Segmental Details

Corporate Finance & Restructuring revenues were $117.5 million, down 11.1% year over year due to lower demand for restructuring services globally. Adjusted EBITDA for the segment was $20 million, down from $32 million in the year-ago quarter, due to lower revenues.

Economic Consulting revenues increased to $124 million from $118 million in the prior-year quarter, largely driven by higher demand for antitrust services in North America. Adjusted EBITDA came in at $15.5 million versus $15.4 million in the prior-year quarter, due to lower revenues.

Forensic and Litigation Consulting revenues fell to $111.4 million in the quarter from $118.2 million in the year-earlier quarter, driven by lower demand for advisory and health solutions. Adjusted EBITDA for the segment decreased to $13 million from $15.2 million on lower revenues.

Technology revenues increased to $45.6 million from $41.9 million in the prior-year quarter on higher consulting demand related to merger and acquisitions. Adjusted EBITDA increased to $5.4 million from $5 million in the year-ago quarter.

Strategic Communications revenues decreased to $46.2 million from $49.9 million in the prior-year quarter, due to a decline in project-based revenues in North America. Adjusted EBITDA for the segment was $4.9 million compared with $8.4 million in the prior-year quarter, largely due to lower revenues.

Balance Sheet & Cash Flow

FTI Consulting had cash and cash equivalents of $138.5 million as of Jun 30, 2017. Total debt was $480.9 million at the end of the first six months. Net cash used in operating activities in the first six months of 2017 was $82.2 million against net cash of $40.6 million generated in the year-ago period.

The company repurchased 1,887,033 shares during the quarter at an average price of $34.74 per share for $65.6 million. As of Jun 30, 2017, FTI Consulting had approximately $78.9 million worth of shares available under its $200.0 million share repurchase authorization.

Guidance

FTI Consulting reaffirmed its guidance for 2017. The company continues to expect revenues to be approximately $1.775–$1.875 billion. It, however, lowered GAAP earnings guidance. It currently expects it to be within $1.37 to $1.67 per share, down from $1.75–$2.10 projected earlier. The company continues to expect adjusted earnings per share in the range of $1.90–$2.20.

The company currently carries a Zacks Rank #4 (Sell)

Stocks to Consider

Some better-ranked stocks in the same space include Exponent, Inc. (NASDAQ:EXPO) , Gartner, Inc. (NYSE:IT) and NV5 Global, Inc. (NASDAQ:NVEE) . Exponent sports a Zacks Rank #1 (Strong Buy), while Gartner and NV5 Global both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Exponent pulled off an average positive surprise of 10.1% over the trailing four quarters, beating estimates thrice.

NV5 Global pulled off an average positive surprise of 1.8% over the trailing four quarters, beating estimates twice.

Gartner pulled off an average positive surprise of 4.6% over the trailing four quarters, beating estimates thrice.

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