By:
Sean Halverson, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
• Navigant Consulting Inc. (NYSE:NCI) is a specialized, global
professional services company that helps clients take control of their future.
The company focuses on markets and clients that are facing transformational
change and significant regulatory or legal pressures.
• After the release of
the Q1 earnings, the company saw strong revenue and EPS growth due to their HSS
joint venture.
• Shareholders have seen
great results as the company returned over $55 million through share
repurchases and dividends.
• Management commented
that they are furthering their sustainability efforts by setting science-based
emission reduction targets.
• The company is
committing 100% renewable energy for their offices internationally and it will
be important to monitor the results of this commitment.
Key
points:
Navigant Consulting Inc. has seen great results from
their HSS joint venture that is contributing to their significant growth within
the first quarter of 2019. The venture is helping NCI to collect cash and
revenue from their clients on a more timely and efficient basis. This is also
creating value for the Baptist Health South Florida health system because the services
provided to these clients are enabling a leaner and smoother operating system.
The developments within HSS are continuing to prove their reliability and
performance within the Healthcare industry.
Since the divesture of
their slow growing Disputes, Forensics, and Legal Technology (DFLT) segment,
the company is seeing that this decision is paying off. The pursuit of
expanding their expertise into healthcare and energy efforts is aligning well
with the business model that NCI is formulating. Julie Howard, the CEO of
Navigant, is evaluating M&A opportunities that provide the company with the
ability to accelerate growth and deepen technological capabilities. This is
allowing the company to continue to execute capital return to shareholders and
is a goal that management will be pushing for throughout 2019.
In FY2019, there are
three building areas that Navigant is focused on to develop the company and
create more value. Data tech digital consulting, data management and analytics,
and automation process skills are the main focus. They will position the
company to feed off the demand that is occurring within the Big Data Analytics
environment. Management is broadening the company’s ability to provide a
stronger skill set in these areas to help existing client relationships, but
also to be more competitive in a newer business environment.
As NCI continues to take
on zero debt, the company has still proven to have the possibility of being
able to give returns back to shareholders. With the $55 million in dividends
and share repurchases in Q1 of 2019, it is reaffirming to shareholders the
strength on Navigant’s current position within the market.
What
has the stock done lately?
Over the past month, NCI
has seen a price increase of 17.5%. This positive start to the year is expected
to grow through the year and EPS expectations for the quarter were beat by
$0.09. Revenue was also stronger than expected with it being $18.02M up from
the previous estimate.
Past
Year Performance:
With the release of their yearly results
for 2018, the stock took a massive hit due to it missing EPS by $-0.03 on the
year. This was mostly due to the tax gain related to the Tax Cuts and Jobs Act
that was recognized in 2017.
Source:
FactSet
My
Takeaway:
With the success that HSS
is bringing Navigant, the company has a positive outlook looking into the near
future. However, the only concern is this renewable energy initiative being
implemented by the CEO. It is extremely expensive to install renewable energy
resources and in some places, the utility companies are not able to support the
technology. There are individuals who pay the large fee to have it installed
and then don’t receive the benefits from them because the utility companies
will not allow them to be used. If Navigant continues to find success with its
HSS joint venture and can smoothly transition to the renewable energy, they
will have very strong results for the remainder of 2019.
Source:
FactSet
