Exponent Initiated At Buy; Cantor Highlights Several Potential Catalysts

In the most recent quarter, the company's EPS missed estimates by 11.6 percent. However, in the preceding three quarters, its positive surprise ranged between 4.9 percent and 60.0 percent.

The brokerage expects the company's revenues to record growth in the next year with upside potential, citing headwinds in connection "with recent results and large engagements subside." The analysts expect Exponent to deliver 3.1 percent annual revenue growth and estimate adjusted EPS to grow 8.6 percent to $1.76 in 2017.

"Potential catalysts include litigation-related work and a pickup in proactive work. Due to the defensive nature of Exponent's work (roughly 60 percent is noncyclical, related to litigation for defendant corporations), volatile economic conditions or even recessions tend not to have much of a negative impact on the company's core organic growth," the analysts said.

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Cantor expects demand from proactive services to be dictated by the increased consumer products sophistication, complexity and regulatory job. The brokerage pointed out that the segment's revenue grew from 25 percent of total revenues in 2010 to 35 percent. The company's strong point is the staff, since 60 percent have their doctorates.

The lead analyst pointed out that Exponent traded at a premium historically compared to its rivals, and Exponent is known to be investor friendly when it comes to capital allocation.

At time of writing, Exponent was down 0.31 percent on Friday, trading at $50.74.

Full ratings data available on Benzinga Pro.