FTI Consulting Upgraded – Analyst Blog

FTI Consulting Inc. (FCN), the global business advisory firm, has been upgraded to Neutral from Underperform. The company provides specialized consulting services across 35 U.S. cities and 21 foreign countries.

 

The rating was upgraded on the back of second quarter 2010 earnings results, which were in line with the Zacks Consensus Estimate. Moreover, economic consulting and strategic communications segments generated double digit growth in revenues and forensic and litigation consulting also had an impressive growth despite a continuing soft environment for litigation.

 

Additionally, FTI is well positioned to benefit from an increased regulatory scrutiny, a proliferation of corporate litigation and a lingering impact of the recession. The company has an experienced set of personnel who play catalytic role in wining major assignments.

 

Internationally, FTI’s unique capabilities of bringing together damage assessment, accounting, economics, statistics, finance, industry and global footprint make it an excellent partner for clients dealing with international arbitration issues. The company generates a continued revenue growth in existing international operations, coupled with contributions from acquisitions made over the past 12 months in Europe, Asia and Latin America.

 

The company is expected to further expand its presence in Asia through the acquisition of FS Asia Advisory Limited, a leading provider of restructuring, corporate finance, advisory and recovery services in Asia.

 

However, we still remain cautious on the stock as Corporate Finance and Restructuring segments remain a drag, owing to a softer trend in bankruptcy work and a slowdown in larger cases. FTI’s Technology segment also continues to struggle due to pricing and a tepid pace of recovery in the Merger & Acquisition markets.

 

Though demand remains solid within most of the company’s business practices, the company has been slow in improving profitability. We note that clients remain cautious on spending due to concerns about the pace of the economic recovery, volatile financial markets and a lack of visibility into the impact of future tax and regulatory policies. FTI Consulting also remains extremely aggressive in its hiring practices, leading to a growth in human capital outlays.