Another Mixed Quarter for Navigant Consulting

| About: Navigant Consulting, (NCI)

One of Navigant Consulting (NYSE:NCI) CEO William Goodyear's opening points in the fourth quarter earnings call yesterday was that 2010 was a bad year. He went on to tout the same three sectors as in previous calls and reports: Economic, Healthcare, and Energy consulting. I outlined the reasons for this growth here and here. Long story short, healthcare legislation has confused businesses looking for help, and the green energy revolution needs advice. These three segments saw a collective 35% YOY rise in revenue, up 11% over the third quarter.

These were only the star performers. The international segment continued to struggle due to a very cost-conscious climate in the United Kingdom. Navigant is responding through staff cuts. The other segment that is lagging is dispute and investigative, and even here the slide is gradually coming to a halt. On another front, business consulting is growing at a steady 5% rate, and economic consulting is booming, up over 30% compared to 2009.

These are Navigant's four main segments, and in each one Navigant is responding to the market conditions in a reasonable way. The staff cuts in the U.K. led to a 1% increase in utilization rates, up to 75% this quarter. Management has a positive outlook for 2011. They expect the restructuring and investing done in 2010 to pay off, and it probably will. The expectation puts EPS around $0.70. The plan is to use the cash flow this generates to pay off some debt. This is a handsome increase, and management expects an underlying 5 to 10% increase in revenue to back this. This puts the forward P/E around 14. This doesn't represent a great value, and I wouldn't consider it a buy point.

To close, a look at the technical picture of Navigant Consulting. After a 25% run, shares were down over 7% today on high volume because fourth quarter earnings were below consensus estimates. This happened on a much grander scale after third quarter earnings, and here's how it went:

  1. Day of announcement: big drop (about 3x as big as today's)
  2. Afterwards: multi-week steady downtrend

Chances are, step two will repeat itself. I'm expecting a pullback to support around $9.15. That would represent a more attractive buying opportunity. In the meantime, I think Navigant is dealing well with tough market conditions for the consulting industry.

Disclosure: I am long NCI.