FTI Consulting Inc. FCN generates a healthy cash flow due to higher cash collections on increased billings. The company benefits from a robust liquidity position. Meanwhile, rising operating expenses affect its bottom line and the inability to pay dividends might discourage some investors from buying the stock.

FCN reported unimpressive third-quarter 2024 results. Quarterly earnings per share of $1.85 missed the Zacks Consensus Estimate by 10.2% and decreased 21% year over year. Total revenues of $926 million lagged the consensus mark 1.5% but increased 3.7% from the year-ago quarter.

How is FTI Consulting Doing?

Diversified offerings and international operations aid FCN’s top-line growth. In 2023, 37% of its total revenues were generated from global businesses. The company’s five reportable segments offer a diversified portfolio of practices providing services across four geographic regions. The wide range of practices and services, diversified revenue streams, specialized industry expertise, and global reach sets FTI Consulting apart from its competitors. Such diversification enables the company to mitigate the effects of economic cycles, crises, events and changes in a particular practice in the industry.

FTI Consulting generates a significant cash flow. In 2022, it generated $135.7 million in free cash flow, which increased to $174.9 million in 2023. Higher net cash provided by operating activities increased the free cash flow. In 2022, the company generated $188.8 million in operating cash flow and the same rose to $224.5 million in 2023. The surge in this metric was due to higher cash collections resulting from increased billings.

FCN’s strategy to reward shareholders through share buybacks is impressive. In 2021, 2022 and 2023, the company repurchased shares worth $46.1 million, $85.4 million and $21 million, respectively. These initiatives not only instill investors’ confidence but also positively impact the bottom line.

FTI Consulting's current ratio (a measure of liquidity) stood at 2.09 at the end of the third quarter of 2024, higher than the industry average of 1.25. Although it declined 5% from the preceding quarter, a current ratio of more than 1 indicates that the company will pay off its short-term obligations efficiently.

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Risks Faced by FCN

The company’s operating expenses increased 10.6% year over year in 2022 and 14.2% in 2023. FCN incurred significantly higher selling, general and administrative expenses (SG&A) in 2023 compared with 2022. The company reported a higher SG&A due to higher non-billable compensation expenses, which include the impacts of the rise in non-billable headcount, rising bad debt, outside services, and other general and administrative expenses. Such an increase in expenses can put the bottom line under pressure.

FTI Consulting never declared and does not have any plan to pay out cash dividends on common stock at present. Such actions discourage dividend-seeking investors from buying its shares.

FCN’s Zacks Rank & Stocks to Consider

FTI Consulting carries a Zacks Rank #3 (Hold) at present.

Some better-ranked stocks in the broader Zacks Business Services sector are Parsons PSN and Qifu Technology, Inc. QFIN.

Parsons sports a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

PSN has a long-term earnings growth expectation of 18.6%. It delivered a trailing four-quarter earnings surprise of 17.5%, on average.

Qifu Technology flaunts a Zacks Rank of 1 at present. It has a long-term earnings growth expectation of 20.9%.

QFIN delivered a trailing four-quarter earnings surprise of 12.4%, on average.

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