Zacks_Analysts' Blog : FTI Outperforms, Reaffirms Outlook - Analyst Blog

FTI Consulting Inc.’s (FCN) third quarter 2011 earnings of 70 cents per share were well above the Zacks Consensus Estimate of 60 cents and the year-ago performance of 43 cents.

Total revenue in the reported quarter jumped 20% year over year to $413.8 million, outpacing the Zacks Consensus Estimate of $384.0 million. Notably, reported revenue also surpassed the previous quarter's revenue, which was the highest in the company’s history. The increase in revenue was driven by improvements across all divisions. Geographically, the company witnessed solid results in Asia-Pacific (up 46%) and Latin America (up 82%).

Adjusted EBITDA during the quarter was up 18% to $73.6 million compared with $62.2 million in the year-ago quarter.

Segment Details

Corporate Finance/Restructuring revenues inched up 0.5% year over year to $110.3 million in the third quarter, driven by growth in the communications, media and entertainment and healthcare practices and contributions from Asia and EMEA. The segment reported positive results on a year-over-year basis for the first time in six quarters.

Forensic and Litigation Consulting revenues grew 18.0% year over year to $99.0 million. This upside in revenues was led by growth in data analytics practice, increased demand for construction solutions, forensic accounting and litigation support services in the Asia-Pacific region and contribution from the acquisition of LECG practices.

Technology segment reported revenues of $57.0 million, up 33.0% year over year. The segment benefited from higher litigation and mergers, acquisition activity, increased investigation matters and several large client assignments.

Economic Consulting revenues surged 61.0% year over year to $95.7 million in the quarter aided by strong demand for financial economics and growth in its European international arbitration practices.  The acquisition of LECG practices also contributed to the growth in the segment.

Strategic Communications revenues also improved 3.0% year over year to $51.8 million in the quarter, due to favorable currency impact and several key projects. However, the segment continues to struggle given the ongoing sluggish capital market activity.

Financials

At quarter end, FTI Consulting’s cash and cash equivalents (excluding restricted cash) totaled $128.2 million, compared with $384.6 million as of December 31, 2010. Shareholders’ equity totaled $1,051.0 million as of September 30, 2011, compared with $1,167.3 million as of December 31, 2010.

During the quarter, the company completed the share repurchase program of $500 million, approved by the board of directors in November 2009.

Guidance

FTI Consulting reaffirmed its fiscal 2011 outlook. The company continues to expect total revenue between $1.50 billion and $1.54 billion and diluted earnings per share within the range of $2.30 and $2.45 for 2011.

Our Take

We expect estimates to move up in the coming days based on the strong third quarter results, positive outlook and growth opportunities in both emerging and developed markets. The Zacks Consensus Estimates for 2011 and 2012 are pegged at $2.39 and $2.79, respectively.

FTI Consulting competes mainly with CRA International Inc. (CRAI) and Navigant Consulting Inc. (NCI). FTI Consulting currently retains a Zacks #1 Rank, which translates into a short-term ‘Strong Buy’ rating. We are also maintaining our long-term “Neutral” recommendation on the stock.