Disappointing 1Q for CRAI - Analyst Blog


After posting solid fourth quarter results, CRA International Inc. ( CRAI ) reported disappointing first quarter results. The Boston, Massachusetts-based company recorded adjusted earnings of 9 cents per share in the first quarter of 2012, considerably lower than the Zacks Consensus Estimate of 45 cents per share and the year-ago quarter earnings of 40 cents per share.

Net earnings per share on a GAAP basis was 5 cents, significantly lower than the year-ago level of 41 cents.

Despite strong performance and continued growth in the litigation business, the results were lower-than-expected due to poor performance of management consulting business.

Quarter Performance 

Adjusted total revenue fell 7% on sequential basis and 12.0% on year-over-year basis to $68.0 million. The lackluster top-line results were attributed to discouraging performance of Management Consulting businesses.

During the quarter, management consulting business suffered mainly due to the uncertain economic environment in Europe. As a result of soft management consulting business, utilization rate plunged to 68% from 75% in the fourth quarter of 2011. International operations were also disappointing, as revenue from the international markets decreased 20%.

CRA International witnessed a drop of 140 basis points (bps) in adjusted gross margin to 32.1%, while adjusted operating margin contracted 420 bps to 5.8%, based on higher expenses and slower revenue growth.

Financial Position

As of March 31, 2012, cash and cash equivalents and short-term investments were $1.1 million compared with $76.1 million as of December 31, 2011. Shareholders' equity at the end of the quarter was $268.7 million compared with $268.4 million in the year-ago quarter.


Despite the lower-than-expected results, CRA International reaffirmed its outlook. For 2012, the company anticipates revenue growth of 6%, utilization rate in the range of low to mid 70's and adjusted operating margin of 11%.

Our Take

Though the company maintained its outlook and Litigation consulting related business continues to perform remarkably, we expect the estimates to go down based on poor quarterly results, slow consumer spending and the ongoing economic uncertainty in Europe. 

The Zacks Consensus EPS estimates for 2012 and 2013 are pegged at $1.81 and $2.01, respectively.

One of CRA International's prime competitors, FTI Consulting Inc ( FCN ) will release its first quarter earnings on May 9, 2012.

CRA INTL INC ( CRAI ): Free Stock Analysis Report
FTI CONSULTING ( FCN ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CRAI , FCN



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