Will FTI Consulting (FCN) Q1 Earnings Benefit From Tax Cuts?

FTI Consulting, Inc. (NYSE:FCN) is scheduled to report first-quarter 2018 results on Apr 26, before the opening bell.

The top line is expected to benefit from strength across Corporate Finance and Restructuring, Forensic and Litigation Consulting, Strategic Communications segments, while the bottom line is likely to be positively impacted by tax benefits.

We observe that shares of FTI Consulting have rallied 38.6% in the past six months, outperforming the industry’s gain of 6.4%.

Top Line to Improve Year Over Year

FTI Consulting operates through five main business segments - Corporate Finance and Restructuring, Forensic and Litigation Consulting, Strategic Communications, Technology and Economic Consulting.

Corporate Finance & Restructuring segment revenues are likely to be driven by higher demand for restructuring services and favorable foreign currency movements. The Zacks Consensus Estimate for this segment’s revenues is pegged at $120 million, reflecting year-over-year growth of 13.3%. In fourth-quarter 2017, segment revenues advanced 15.2% year over year to $130.5 million.

Forensic and Litigation Consulting segment revenues are expected to rise on the back of higher demand for global investigations and litigation services.The Zacks Consensus Estimate for this segment’s revenues is pegged at $118 million, reflecting year-over-year growth of 5.9%. In fourth-quarter 2017, segment revenues climbed 14.6% year over year to $120.9 million.

Higher retained revenues from public affairs and corporate reputation services in Europe, the Middle East and Africa are likely to boost Strategic Communications segment revenues. The Zacks Consensus Estimate for this segment’s revenues is pegged at $51 million, reflecting year-over-year growth of 16.7%. In fourth-quarter 2017, segment revenues increased 8% year over year to $54.3 million.

Revenues from the Economic Consulting segment are likely to decline due to lower demand for antitrust services. The Zacks Consensus Estimate for this segment’s revenues is pegged at $121 million, reflecting a year-over-year decline of 13.1%. In fourth-quarter 2017, segment revenues decreased 6.4% year over year to $121.1 million.

Decrease in demand for managed review services is likely to weigh on Technology segment revenues. The Zacks Consensus Estimate for this segment’s revenues is pegged at $41.32 million, reflecting a year-over-year decline of 10.4%. In fourth-quarter 2017, segment revenues declined 5.9% year over year to $40.9 million.

Strength across Corporate Finance and Restructuring, Forensic and Litigation Consulting, Strategic Communications segments will contribute significantly toward year-over-year growth of FTI Consulting’s total revenues, the Zacks Consensus Estimate for which is currently pegged at $456.01 million, reflecting year-over-year growth of 2.2%. In fourth-quarter 2017, revenues rose 5.8% from the year-ago quarter to $467.7 million.

Tax Cut to Boost Bottom Line

The Zacks Consensus Estimate for earnings per share in the to-be-reported quarter is pegged at 65 cents, indicating year-over-year growth of 91.2%. We expect the company to witness bottom-line growth on the back of lower tax rates from the new Tax Cuts and Jobs Act.

In fourth-quarter 2017, earnings were 78 cents per share compared with 24 cents in the year-ago quarter. The company witnessed a tax benefit (as a result of lower tax) of $44.9 million in fourth-quarter 2017.

Our Model Doesn’t Suggest a Beat

Please note that according to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FTI Consulting has a Zacks Rank #1 and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult.

Stocks to Consider

Here are some stocks from the broader Business Services sector that investors mayconsider, as our model shows that these have the right combination of elements to beat on earnings in first-quarter 2018:

Mastercard Incorporated (NYSE:MA) has an Earnings ESP of +0.83% and a Zacks Rank #2. The company is slated to report quarterly numbers on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Brink’s Company (NYSE:BCO) has an Earnings ESP of +5.25% and a Zacks Rank #2. The company is slated to report quarterly results on Apr 25.

FLEETCOR Technologies, Inc. (NYSE:FLT) has an Earnings ESP of +0.37% and a Zacks Rank #2. The company is expected to report quarterly numbers on May 7.

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