FTI Consulting Inc.’s (FCN) second quarter 2011 adjusted earnings of 64 cents per share were well above the Zacks Consensus Estimate of 57 cents and the year-ago performance of 52 cents per share. Reported earnings, however, exclude the special charge of 24 cents.
Total revenue in the reported quarter increased 15% year over year to $400.4 million, outpacing the Zacks Consensus Estimate of $383.0 million. Notably, the company generated the highest quarterly revenue in its history during second quarter 2011. The increase in revenue was driven by improvements in Forensic and Litigation Consulting, Technology, Strategic Communications Businesses and Economic Consulting Revenue, partially offset by lower revenues from the Corporate Finance/Restructuring segment.
Adjusted EBITDA during the quarter was $66.5 million compared with $65.5 million in the year-ago quarter.
Segment Details
Corporate Finance/Restructuring revenues fell 8.3% year over year to $101.9 million in the second quarter due to sluggish demand for restructuring activities and bankruptcy services resulting from continued improvements in the credit markets and the macroeconomic environment. However, the segment benefited from the health care practice and contributions from its Asia operations.
Forensic and Litigation Consulting revenues grew 15.6% year over year to $93.4 million. This upside in revenues was driven by increased demand for construction, forensic investigations, insurance and compliance related engagements.
Technology segment reported revenues of $57.1 million, up 33.5% year over year. The segment benefited from higher litigation activity, increased investigation matters and several large client assignments.
Economic Consulting revenues increased 46.4% year over year to $94.5 million in the quarter aided by strong demand for financial economics and growth in its European international arbitration practices. The segment’s merger and acquisition (M&A) activities also strengthened in the quarter.
Strategic Communications revenues also improved 7.5% year over year to $53.6 million in the quarter.
Financials
At quarter end, FTI Consulting’s cash and cash equivalents (excluding restricted cash) totaled $98.7 million, compared with $384.6 million as of December 31, 2010. Shareholders’ equity totaled $1,028.5 million as of June 30, 2011, compared with $1,167.3 million as of December 31, 2010.
During the second quarter of 2011, the company retired 628,000 shares.
Guidance
FTI Consulting reaffirmed its fiscal 2011 outlook. The company continues to expect total revenue between $1.50 billion and $1.54 billion and diluted earnings per share within the range of $2.30 and $2.45 for 2011.
Our Take
We expects estimates to move up in the coming days, as the second quarter results were better than expected and inspite of seasonally weak third quarter, FTI Consulting reiterated its outlook. The Zacks Consensus Estimates for 2011 and 2012 are pegged at $2.37 and $2.78, respectively.
FTI Consulting competes mainly with CRA International Inc. (CRAI) and Navigant Consulting Inc. (NCI). FTI Consulting currently retains a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating. We are also maintaining our long-term “Neutral” recommendation on the stock.
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