Navigant Marginally Misses on Q1 Earnings - Analyst Blog

Navigant Consulting Inc (NCI) reported first-quarter 2014 net income from continuing operations of $10.4 million or 21 cents per share versus $13.1 million or 26 cents per share in the year-ago quarter. The year-over-year decline in earnings was primarily due to a decrease in revenues. Reported earnings missed the Zacks Consensus Estimate by a penny.
    
Adjusted earnings per share were 20 cents in first quarter 2014 versus 26 cents in the year-ago quarter.

Total revenue was down 5.6% year over year to $197.7 million while revenues before reimbursements (RBR) decreased 4.4% to $175.1 million in the reported quarter. The decrease in first quarter 2014 revenues was attributable to lower RBR in the Disputes, Investigations & Economics segment; Financial, Risk & Compliance; and Energy segment. Total reported revenue, however, exceeded the Zacks Consensus Estimate of $188 million.

EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter stood at $23.0 million compared with $29.2 million in the year-ago quarter. Adjusted EBITDA was $22.3 million for first quarter 2014 compared to $28.9 million in the year-ago quarter.

Segment Performance

The Healthcare segment's RBR increased 2.6% year over year to $44.7 million in first quarter 2014, driven by organic growth. Operating profit for the segment was down 11.2% year over year to $14.0 million. The Energy segment's RBR was down 8.2% to $22.9 million due to slower rebound in one service line. The segment operating profit declined 26.3% year over year to $6.5 million.

Disputes, Investigations & Economics' RBR decreased 1.2% year over year to $76.0 million primarily driven by lower RBR from economics engagements. The segment operating profit was down 4.3% year over year to $24.7 million. Financial, Risk & Compliance Advisory segment registered a 16.6% year-over-year decrease in RBR to $31.4 million owing to reduced contribution from the mortgage servicing review engagements, and a planned reduced contribution from restructuring services in 2014. Operating profit for the segment was down 4.8% year over year to $13.5 million.

Liquidity

At Mar 31, 2014, Navigant had $2.7 million in cash and cash equivalents. Free cash flow stood at $18.5 million for first quarter 2014 versus $21.9 million in the prior-year period largely due to increased capital spending, primarily on technology infrastructure investments. Debt levels were down 27% year over year to $120.8 million.  

Leverage (debt divided by trailing twelve month adjusted EBITDA) improved to 1.03 as of Mar 31, 2014 compared with 1.48 as of Mar 31, 2013.

Navigant repurchased 408,992 shares of common stock during first quarter 2014 at an average price of $18.07 per share for $7.4 million. As of March 31, 2014, the company had $ 92.6 million under its share repurchase authorization.

Outlook

For full year 2014, Navigant maintained its guidance and expects RBR to be in the range of $735 million and $775 million, while total revenue is expected to be in the range of $810 million and $850 million. Adjusted EBITDA is expected to be within $120 million and $130 million. Adjusted earnings per share are expected to be between $1.03 and $1.13.

Going Forward, Navigant expects the Energy segment to regain its growth momentum with the realignment of certain offerings against demand.

Navigant currently has a Zacks Rank #4 (Sell). Other stocks that look promising and are worth a look include Huron Consulting Group Inc. (HURN), NV5 Holdings, Inc. (NVEE) and Towers Watson & Co (TW), each carrying a Zacks Rank #2 (Buy).