CRA International Beats - Analyst Blog

CRA International Inc. (CRAI), a leading global consulting firm, reported fourth quarter 2010 pro forma earnings of 35 cents per share, which outperformed the Zacks Consensus Estimate by 4 cents and also earnings of 32 cents reported in the year-ago quarter.

The improvement in results was aided by an active pipeline for both litigation and management consulting businesses and cost-containment initiatives resulting in margin enhancement.

Total revenue grew 2.3% on a year-over-year basis and 20% sequentially to $74.5 million due to a demand uptake for consulting services. 

The company's full-year adjusted earnings per share were 87 cents versus $1.07 per share in full fiscal 2009. Revenues were $281.0 million in full fiscal 2010, representing a year-over-year drop of 4.0%.

On a GAAP basis, net earnings for the fourth quarter and 2010 were 17 cents and 24 cents, respectively, lower than 18 cents and 59 cents recorded in the year-ago quarter and year, respectively.

Quarter Performance 

During the reported quarter, CRA International's results were largely impacted by an improving utilization rate on the back of successful restructuring initiatives. The utilization rate upped 500 basis points sequentially to 73%, showing signs of a recovery in consumer spending. This marks the highest utilization rate achieved by the Boston, Massachusetts-based company in more than two years and also surpassed management's target level of 70% per quarter.

CRA International saw year-over-year improvements of 130 basis points (bps) in gross margin to 33.4% and 60 bps in operating margin to 9.5%, based on its efficient restructuring activities.

Financial Position

As on November 27, 2010, the cash and cash equivalents and short-term investments were $80.5 million compared with $106.5 million as on November 28, 2009. Shareholders' equity at the end of 2010 was $256.4 million compared with $255.7 million at the end of 2009.

At the end of the year, the company had cash flow from operation of more than $21 million and CRA International bought back $25.7 million convertible bonds at a discount.

Outlook
 
Although CRA International remains cautious regarding client spending, the company remains optimistic regarding 2011 based on its solid reputation and quality of work, healthy cash flow and balance sheet position, improving business conditions and cost-containment initiatives.

Moreover, the company is taking initiatives like broadening of alliance across practices to encourage cross selling, expansion of client base to ensure new business lead flow and recruit efficient people to ensure great services to the clients.

Our Take

Litigation and management consulting related areas will remain reasonably active in the fourth quarter of 2010 and we believe that the company's growth initiatives, new business wins, and healthy cash balance will help generate positive results in the long term. Moreover, we expect the estimates to go up based on better-than-expected quarterly results and starting of the next year by management on a positive note.

The Zacks Consensus EPS estimates for 2011 and 2012 are $1.24 and $1.36, respectively.

One of Its prime competitors, FTI Consulting Inc (FCN), is expected to release its fourth quarter earnings on February 21, 2010 and Navigant Consulting Inc (NCI) is expected to report its fourth quarter earnings on February 14, 2010.

 
CRA INTL INC (CRAI): Free Stock Analysis Report
 
FTI CONSULTING (FCN): Free Stock Analysis Report
 
NAVIGANT CONSLT (NCI): Free Stock Analysis Report
 
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