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Navigant (NCI) Beats Q3 Earnings, Shares Up on Raised View

Navigant Consulting Inc.NCI reported adjusted earnings per share of 37 cents in third-quarter 2016, compared with 30 cents in the prior-year quarter. Adjusted earnings comfortably beat the Zacks Consensus Estimate by 8 cents. Consequently, shares were up significantly by 15.4% to close at $23.27 as of Oct 27, 2016 following the earnings release.

Total revenues for the quarter were $261.4 million compared with $230.1 million in the prior-year period. Revenues before reimbursements (RBR) increased 13.1% year over year to approximately $237.1 million, beating the Zacks Consensus Estimate of $232 million. Revenues increased due to strong demand in Financial Services Advisory, Compliance Healthcare and Energy Segments.

Adjusted EBITDA was $39.8 million, up 26% from $31.6 million in the prior-year quarter.

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Segment Performance

RBR for the Healthcare segment, which turned out to be one of the strongest performers this quarter, increased 22.2% year over year to $91.0 million. The improvement was driven by strong demand for large, strategy-led transformation projects.

The Energy segment's RBR saw growth of 6.4% year over year to $28.4 million in the reported quarter. The growth was driven by strength across the segment's portfolio of solutions, in addition to ongoing penetration of key client accounts. The segment's operating profit margin increased marginally to 29.3% from 28.8% in the year-ago quarter.

The Disputes, Forensics & Legal Technology (earlier known as Disputes, Investigations & Economics) segment's RBR decreased by 3.4% year over year to $77.4 million. The decrease was primarily driven by declines in demand and currency fluctuations. Segment operating margin decreased to 33.7% from 35.5%.

The Financial, Risk & Compliance Advisory segment's RBR increased 42.3% year over year to $40.3 million in the quarter. Operating profit margin for the segment increased to 43.9% from 36.7% in the year-earlier quarter due to higher RBR.

Balance Sheet and Cash Flow

As of Sep 30, 2016, Navigant had cash and cash equivalents of about $7 million.

Bank debt was $161.2 million as of Sep 30, 2016, compared with $146.8 million as of Sep 30, 2015. Leverage (bank debt divided by trailing twelve-month adjusted EBITDA) was 1.17x at Sep 30, 2016, compared with 1.22x as of Sep 30 2015.

For the quarter, net cash provided by operating activities was $48.0 million, compared with $38.9 million in the year-ago quarter, due to improved earnings. Free cash flow increased to $25.5 million for third-quarter 2016 compared with $18.2 million in the prior-year quarter, primarily driven by decrease in capital investment spending. Navigant repurchased 309,233 shares for approximately $5.8 million at an average cost of $18.68 per share. As of Sep 30, 2016, an aggregate of $69.3 million remained available under the company's share repurchase authorization.

NAVIGANT CONSLT Price, Consensus and EPS Surprise

NAVIGANT CONSLT Price, Consensus and EPS Surprise | NAVIGANT CONSLT Quote

Outlook Up

Navigant raised its 2016 outlook, the company currently expects RBR in the range $920-$940 million from earlier expectation of $900-$940 million. Total revenues are expected to be in the range of $1.00-$1.02 billion (up from $960 million to $1.01 billion earlier). Adjusted EBITDA is expected to be in the range of $137.5-$145.0 million (from earlier expectation of $132-$145 million), while adjusted EPS is expected to be in the range of $1.15-$1.25 (from prior expectation of $1.05-$1.15).

Navigant currently sports a Zacks Rank #1 (Strong Buy). Some other favorably ranked stocks include Accenture plc ACN , Exponent Inc. EXPO and Acacia Research Corporation ACTG . All three stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Acacia Research has a modest earnings record, beating estimates once in the four trailing quarters, with an average positive surprise of 92.86%. The company's share price has increased by approximately 38.69% year to date.

Accenture has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 3.19%. The company's share price has increased by approximately 10.48% year to date.

Exponent has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 9.71%. The company's share price has increased by approximately 13.13% year to date.

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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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