Navigant Posts Weak Prelims - Analyst Blog

Navigant Consulting Inc. (NCI), a financial and regulatory consultant, recently reported its preliminary results for the fourth quarter and fiscal 2010.  The full year results are expected to release in the month of February 2011.

The Chicago, Illinois-based company expects fourth quarter 2010 adjusted earnings per share to be 15 cents, below the last quarter and the year-earlier quarter's earnings of 16 cents and 18 cents, respectively. The Zacks Consensus Estimate for the quarter is 16 cents. The company expects earnings to decline due to a rise in cost of services.

Navigant's total revenue for the quarter is projected to jump 5.2% year over year to $182.9 million. The Zacks Consensus Estimate for the quarter is $183 million.

The company's full-year adjusted earnings per share are estimated to be 61 cents as compared with 68 cents in 2009. Revenues are projected to be $703.7 million in full fiscal 2010, down 0.5% from the prior-year period.

Revenues before reimbursements (RBR) for the quarter are estimated to be $162 million, representing a sequential as well as year-over-year growth of 6%. In 2010, RBR is expected to be $623 million, down 2% from 2009.

However, consultant utilization rate at 74% is anticipated to drop 2.6% in the reported quarter and 1.3% in 2010. Average bill rate is expected to rise 2.7% and 4.7%, respectively, in the fourth quarter and 2010.

The results are anticipated to be below expectations; but the company succeeded in achieving top-line and headcount growth during the quarter.

Inside The Headline Numbers

Segment wise, Dispute and Investigative Services revenues are estimated to fall 2.1% year over year to $70.6 million during the quarter. International Consulting revenues are expected to plunge 26.3% year over year to $16.1 million. Weaker demand for advisory services in the European market and slower government spending in U.K led to the decline in International Consulting revenues.

However, revenues from Business Consulting Services are expected to spike 16% year over year to $78.2 million, aided by the healthcare and energy teams' strong performances. The acquisition of EthosPartners in October also benefited health care results.

Economic Consulting revenues are also projected to grow 43.5% year over year to $18.1 million in the reported quarter, driven by higher demand and solid contribution from senior hires in 2010. In 2011, the segment is expected to benefit from the hiring of senior economists.

Navigant's total cost of services is estimated to leap 6.7% from the prior-year quarter to $133 million.

Navigant's average billable full-time equivalent (FTE) headcount will jump 4.2% to 1,755, during the quarter, reflecting the recruitment of a senior economists and acquisition of EthosPartners.

Financials

At the end of 2010, Navigant expects cash and equivalents to be $2.0 million versus $49.1 million at the end of 2009. As of December 31, 2010, total non-current liabilities are estimated to be $252.7 million compared with $268.0 million as of December 31, 2009. Navigant will end the year with a debt of approximately $203 million.

Outlook

The company projects fiscal 2011 revenues in the range of $715 million to $760 million, driven by the 2010 investments and stable market condition. The adjusted EPS is expected to be in a range of 70 cents to 77 cents. The Zacks Consensus Estimate for EPS is 82 cents and is $757 million for revenues.

Management has identified economics, healthcare and energy as key long-term growth drivers and subsequently sharpened its investment focus on these areas.

Our Take

The fourth quarter results are likely to be below expectations, but the company believes that the capital invested and the strategic actions implemented over the past 18 month will drive earnings in 2011. However, estimates will most likely decrease in the coming days, based on slightly disappointing preliminary results.

One of Navigant's primary competitors FTI Consulting Inc. (FCN) will report its fourth quarter earnings on February 21, 2011.

 
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