Summary
- FTI Consulting beats by $0.28, shares end the day up 9.7%.
- The company offers a unique play on both the restructuring business during and following the pandemic as well as other leading niche consulting expertise.
- A strong history of growth in net margins in conjunction with a good balance sheet and solid free cash flow generation sets up the company for further organic and M&A-related.
- Continued expansion internationally will assist in capturing increased market share in a competitive TAM.
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We currently regard FTI Consulting (FCN) as attractive for purchase by investors seeking long-term growth of capital. In addition, we believe FCN provides an opportune play on the restructuring business in times when Chapter 11 filings are soaring. Nationwide restructuring filings jumped 44% in June compared to 2019 and are only expected to rise as we head into the fall.
Strong Second Quarter Performance
On July 30, FCN reported its highest revenue quarter in its history with its fifth best quarter for adjusted EPS. FCN shares surged on the strong results led by the performance in its Corporate Finance and Restructuring segment. Record segment revenues of $246 million increased 29.5% compared to the prior year second quarter. This is despite a decline in business transformation and transaction services. Total revenues grew 0.3% to $607.9 million for the quarter. This uptick in corporate restructuring is expected to continue at this level for at least the remainder of the fiscal year, barring any extraordinary government intervention to prevent bankruptcies.
Business Strategy and Outlook
FTI Consulting engages in the provision of financial, legal, operational, political and regulatory, reputational, and transactional advisory services. Operating in 82 cities globally, FCN consists of over 5,800 employees, with over 590 in senior managing director positions. A Fortune 1000 company, they operate in nine specialized industry groups and hold as clients 8 of the 10 world's top bank holding companies, 96 of the 100 top law firms, and 53 of the global 100 corporations. Having expensive, niche experts on the payroll cannot often be justified at most firms. FCN takes on the utilization risk by hiring these experts and providing consulting work to solve this issue.
