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ICF International (ICF) Rides on Buyouts and Contract Wins

ICF International, Inc. 's ICFI shares have rallied 31.6% in the past year, outperforming the 22.6% rise of its industry .

The company recently reported mixed third-quarter 2018 results, with earnings missing the Zacks Consensus Estimate and revenues surpassing the same.

Non-GAAP EPS of $1.01 missed the consensus mark by a penny but improved 21.7% on a year-over-year basis. Revenues came in at $333 million, which beat the consensus mark by $0.9 million and increased 9.1% year over year.

The company has a dismal earnings surprise history, missing estimates in two of the last four quarters. It reported an average four-quarter negative earnings surprise of 2.4%.

In the past 30 days, the Zacks Consensus Estimate for fourth-quarter earnings has been revised 2.5% upward.

What's Driving ICF?

The company is seeing strength across state and local government business as well as international government work. It continues to win contracts and register growth in business development pipeline, a significant portion of which is represented by disaster recovery. In the last reported quarter, the company gained a $5-million contract to provide on-the-job training services in the U.S. Virgin Islands affected by hurricanes in 2017. The company is well positioned to receive additional contracts because of raised fiscal 2018 and 2019 civilian agency budgets and the recent buyout of DMS.

ICF International, Inc. Revenue (TTM)

ICF International, Inc. Revenue (TTM) | ICF International, Inc. Quote

Acquisition is an important element of ICF's growth strategy. So far this year, the company has acquired We are Vista, a U.K.-based creative communications agency; DMS Disaster Consultants, a disaster planning and recovery services firm; and The Future Customer, a boutique loyalty strategy and marketing company. While the acquisition of We are Vista is expected to strength the company's global marketing, technology, communications and digital services portfolio, DMS should improve its disaster response, recovery and preparedness offerings. Acquisition of The Future Customer has extended ICF's loyalty business to Europe.

Risks

A considerable portion of ICF's business comes from commercial work that is highly concentrated in cyclical industries like financial services, energy, air transportation, retail, health and environmental. Therefore, demand for the company's services decline when these industries experience downfall, which is likely to continue in the future as well. As the company has expanded its work with commercial clients, considerable variations in revenues and profits are expected from time to time with ups and downs in the global economy.

Moreover, ICF could see escalation in costs. The company plans to make significant investments in capture and proposal activities, infrastructure and intellectual property development, loyalty program and acquisitions. Also, it is embroiled with various legal matters and proceedings including the one associated with, the Road Home contract. Apart from being a huge drain on resources, this must have earned the company a bad name.

Zacks Rank & Stocks to Consider

Currently, ICF is a Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

A few better-ranked stocks in the broader Zacks Business Services sector are Paychex, Inc PAYX , Genpact Limited G and WEX Inc WEX , each carrying a Zacks Rank #2 (Buy). The long-term expected EPS (three to five years) growth rate for Paychex, Genpact and WEX is 8.5%, 10% and 15%, respectively.

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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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