FTI Consulting Inc
) reported third quarter 2012 adjusted earnings of 60 cents per
share, which beat the Zacks Consensus Estimate by a penny, but
fell shy of the year-ago earnings of 70 cents per share.
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Total revenue in the reported quarter slipped 6.7% year over year
to $386.1 million and also lagged the Zacks Consensus Estimate of
$389.0 million. Revenue dropped due to the frail performance of
Technology, Forensic and Litigation Consulting, and the Strategic
Adjusted EBITDA slid 13.7% from the year-ago quarter to $62.3
million and Adjusted EBITDA margin decreased 150 basis points
(bps) to 16.1%. Utilization decreased for Corporate
Finance/Restructuring segment (to 70% from 75% in the year ago
quarter), Economic Consulting segment (79% from 85%) and Forensic
and Litigation Consulting segment (62% from 69%).
Corporate Finance/Restructuring reported revenue of $110.2
million, flat year over year. Solid demand in health care
practices and slightly higher success fees for bankruptcy and
restructuring practices in North America were being offset by a
continued slowdown in real estate.
In order to provide impetus to its corporate finance advisory
restructuring activities as well as boost its expansion plans in
Australia, on October 2, the company acquired Australia-based
KordaMentha (Qld) (KMQ). The deal is expected to add 70 people,
$5 million in revenue and $1.2 million in Adjusted EBITDA in the
fourth quarter of 2012, but will also impair the EPS by 2 cents
as a result of stamp-tax to be paid on the acquisition.
Economic Consulting revenue inched up 0.7% to $96.4 million in
the quarter. The upside was aided by revenue growth in antitrust
litigation, financial economics, international arbitration and
regulatory consulting practices, partially offset by slow M&A
practice and increased pricing pressure in international
arbitration and valuation practices.
Forensic and Litigation Consulting revenue declined 15.8% to
$83.4 million as North American practices remained weak
Technology segment revenue was down 11.5% to $45.8 million, due
to lower pricing and loss of certain large investigation and
Strategic Communications revenues dipped 12.9% year over year to
$46.7 million in the quarter, due to lower M&A-related
projects in Asia-Pacific, continued softness in the North America
region, pressure on retainer fees, and miserable capital market
For 2012, the company continues to expect revenues in the range
of $1.56 billion and $1.58 billion and adjusted EPS between $2.15
As of September 30 2012, FTI Consulting's cash and cash
equivalents totaled $126.9 million, compared with $264.4 million
as of December 31, 2011. Shareholders' equity totaled $1,173.7
million as of September 30, 2012, compared with $1,106.2 million
as of December 31, 2011.
The company remains focused on investment in areas of domain
expertise such as healthcare, energy, communications, media and
entertainment, and insurance, and in geographic opportunities
such as investment in the Australian restructuring practice.
Further, though the insecurity over the Presidential election is
over, overall uncertainty in the global market, looming fiscal
cliff and the lingering impact of Hurricane Sandy prevail.
Additionally, the results were not much encouraging, hence we
prefer to remain in the sideline.
FTI Consulting, which competes with
), currently retains a Zacks #3 Rank, which translates into a
short-term 'Hold' rating. We are also maintaining our long-term
'Neutral' recommendation on the stock.