Why Is FTI Consulting (FCN) Up 2% Since Last Earnings Report?

It has been about a month since the last earnings report for FTI Consulting (FCN). Shares have added about 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 its most recent earnings report in order to get a better handle on the important drivers.

FTI Consulting Lags on Q4 Earnings, Revenues Beat Estimates

FTI Consulting delivered mixed fourth-quarter 2019 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same.

Quarterly adjusted EPS of 80 cents missed the Zacks Consensus Estimate by 13% and decreased 3.6% on a year-over-year basis. The bottom line was negatively impacted by FX remeasurement losses, resulting from the strengthening of the British Pound and Euro against the US dollar.

Total revenues of $602.2 million beat the consensus mark by 13.6% and increased 19.3% year over year. The increase was driven by higher demand across all business segments.

Revenues by Segment

Corporate Finance & Restructuring’srevenues increased 25.1% year over year to $181.1 million. The upside was driven by higher demand for restructuring, and business transformation and transaction services, and higher success fees. The segment contributed 32% to total revenues.

Forensic and Litigation Consulting’srevenues increased 13.8% year over year to $150.3 million. The improvement came on the back of higher demand for disputes and investigations services. The segment contributed 24% to total revenues.

Strategic Communications’ revenues increased 14.3% year over year to $66.3 million. The upside was driven by an increase in pass-through revenues and higher project-based revenues in North America and EMEA, primarily associated with corporate reputation services. The segment contributed 10% to total revenues.

Economic Consulting’s revenues increased 19.2% year over year to $153.1 million. The increase was supported by higher demand for merger and acquisition-related antitrust, and financial economics services. Higher realization for international arbitration services also drove the segment’s revenues. The segment contributed 24% to total revenues.

Technology’s revenues rose 23.5% year over year to $51.5 million. The increase was driven by higher demand for global cross-border and merger, and acquisition-related “second request” services.

Operating Results

Adjusted EBITDA was $58.3 million, up 8.6% on a year-over-year basis. The increase was driven by higher revenues across all business segments, partially offset by higher compensation associated with an increase in variable compensation, a 17.8% increase in billable headcount, and higher SG&A expenses. Adjusted EBITDA margin declined 90 basis points (bps) year over year to 9.7%.

Balance Sheet and Cash Flow

FTI Consulting exited the quarter with cash and cash equivalents of $369.4 million compared with $258.5 million in the prior quarter. Long-term debt was $275.6 million compared with $273.1 million at the end of the prior quarter.

The company generated $141 million of net cash from operating activities and CapEx was $15 million in the quarter. It spent $28 million to repurchase 259,823 shares in the quarter.

2020 Guidance

Management expects adjusted EPS of $5.5-$6. The company expects revenues of $2.45-$2.55 billion.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 25% due to these changes.

VGM Scores

Currently, FTI Consulting has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

FTI Consulting has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.