FTI Consulting's Defensive Resilience: A Buy Ahead of Q2 Results

FTI Consulting (FCN) delivered a mixed first-quarter 2025 report, with total revenue falling 3.3% to $898.3 million amid sector-specific headwinds. Yet beneath the headline decline lies a story of strategic discipline and defensive positioning. The professional services firm's resilience in high-margin crisis-related segments, coupled with aggressive capital returns, positions it as a compelling play for investors ahead of Q2 results. Here's why FCN remains a buy despite the near-term turbulence.

Revenue Divergence: Crisis Services Outperform, Restructuring Lags

While total revenue declined, the performance of FTI's five segments tells a critical story. Forensic and Litigation Consulting grew 8.3% to $190.6 million, driven by demand for risk and data analytics services—areas where FTI's expertise in litigation, regulatory investigations, and cybersecurity is unmatched. Similarly, Strategic Communications rose 7.2%, fueled by corporate reputation work and pass-through revenues.

These gains were offset by weaker demand in Corporate Finance & Restructuring (-6.1%) and Economic Consulting (-12.1%). The former segment, which relies on corporate restructurings and M&A activity, faces headwinds from broader market caution, while the latter's antitrust and financial economics work has been disrupted by regulatory uncertainty. Still, management's focus on high-margin, recession-resistant services—like forensic investigations and litigation support—suggests a deliberate shift toward less cyclical revenue streams.

Cost Cuts and Capital Returns: A Margin-Supporting Play

The $25.3 million special charge in Q1, part of a $33.5 million total since late 2024, underscores FTI's aggressive restructuring. While this reduced GAAP EPS to $1.74, adjusted EPS held steady at $2.29, reflecting cost discipline. The cuts—targeting ~5% of its workforce—are projected to save $85 million annually, a critical buffer as margins in some segments, like Corporate Finance, have compressed from 20.6% to 16.3%.

Meanwhile, FTI's capital allocation strategy remains investor-friendly. The company spent $186 million on buybacks in Q1, and the board's $400 million authorization boost brings total available repurchases to $568 million. With shares trading at ~16x trailing adjusted EPS (down from 20x in late 2023), the buybacks are accretive and signal confidence in the stock's valuation.

The Case for Defensive Growth

FTI's Q1 results reflect sector-specific challenges, but its long-term positioning is strong. Clients increasingly rely on its “full-stack” crisis management capabilities—from litigation support to reputation defense—in an era of geopolitical tension, regulatory scrutiny, and corporate instability. CEO Steven Gunby's emphasis on aligning resources with demand suggests the firm is prioritizing high-margin, recurring work over cyclical services.

While Q2 revenue may still face headwinds, the combination of margin-stabilizing cost cuts and a robust buyback program creates a favorable risk-reward profile. The stock's ~12% dividend yield (a rare luxury in professional services) adds a defensive kicker.

Investment Thesis: Buy Ahead of Q2

FTI's Q1 results are a snapshot of short-term sector weakness, but its structural advantages—superior crisis expertise, recurring revenue models, and shareholder-friendly capital allocation—argue for patience. With shares down 18% year-to-date and trading below tangible book value, the downside is limited. The $400 million buyback boost and margin stabilization efforts suggest the worst is behind it.

Investors should view dips below $175 as a buying opportunity. A positive Q2 print—one showing stabilization in Corporate Finance or stronger-than-expected Forensic growth—could spark a meaningful rally. For now, FTI remains a top pick in a defensive sector, offering both downside protection and growth in high-margin niches.

Position: Buy
Price Target: $210 (24x 2025E adjusted EPS)
Risk: Continued weakness in restructuring demand or regulatory delays.