FTI Tops by a Penny, Rev. Lags - Analyst Blog

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FTI Consulting Inc . ( FCN ) 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.

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 Communications segment.

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%).

Segment Details

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 litigation matters.

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 activities.


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 and $2.35.


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.

Our Take

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 theglobal 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 Stantec Inc. ( STN ), 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.

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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 Nasdaq, Inc.

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

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