FTI Consulting, Inc. FCN is currently benefiting from lower tax rates that are contributing to the bottom line. Shares of the company have rallied 37.1% over the past year, against the 9.5% decline of the industry it belongs to.
Factors Driving FTI Consulting’s Performance
Increased regulatory scrutiny and a proliferation of corporate litigation are likely to increase the demand for FTI Consulting’s products. Additionally, structural change has become a necessity in the rapidly evolving global markets as management teams look to fend off rivals, protect intellectual property rights and transform businesses via M&A, divestiture and other restructuring activities. These developments call for FTI Consulting’s specialized skill sets and are likely to boost revenues.
Lower tax rates (as a result of Tax Cuts and Jobs Act) are contributing to FTI Consulting’s bottom line. The company witnessed lower effective tax rate of 31% in third-quarter 2018 compared with 22.2% in the year-ago quarter. In the quarter, earnings came in at $1.00 per share, up from 83 cents in the year-ago quarter.
With the bottom line in good shape, the company continues to pursue opportunities in areas like business transformation services, transaction advisory business, restructuring, retail, construction, data and analytics, cyber business, information governance and international arbitration. This makes it an excellent partner for global clients dealing with international arbitration issues, thereby generating continued revenue growth from the existing international operations.
FTI Consulting raised 2018 earnings per share (EPS) guidance to the range of $3.60-$3.80 from the previous expectation of $2.90-$3.30.
Summing Up
Despite significant growth prospects, FTI Consulting is not free from overhangs. Higher investments in hiring professionals are likely to increase costs and put pressure on bottom-line growth. Also, the company remains susceptible to seasonality and foreign exchange risks. Nevertheless, we believe that strong international operations bode well for FTI Consulting.
Zacks Rank & Stocks to Consider
Currently, FTI Consulting carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the Zacks Business Services sector are Automatic Data Processing, Inc. ADP, Paychex, Inc. PAYX and Navigant Consulting, Inc. NCI, each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Automatic Data Processing, Paychex and Navigant Consulting is 12.5%, 8.8% and 13.5%, respectively.
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