2 Solid Earnings Reports - Foster Wheeler (FWLT) and FTI Consulting (FCN)

Knock on wood but we continue a strange streak of no major earnings blowouts from the myriad fund holdings. I had reduced both positions going into earnings to reduce risk, but looks like both came through quite well.

As opposed to Huron Consulting (HURN) which we sold out of yesterday, peer FTI Consulting (FCN) just continues to execute quarter after quarter; beat estimates and raise guidance - par for the course for these guys. All the drivers that should be driving HURN are in fact driving FCN. All this earnings growth even with a large share count increase (nearly a quarter) - even more impressive.

• Business advisory firm FTI Consulting Inc. said Wednesday its first-quarter profit more than doubled, surpassing Wall Street's expectations, as fallout from the subprime mortgage mess spurred strong revenue growth across all business segments.
• For the three months ended March 31, the company reported income of $31.3 million, or 59 cents per share, compared with $15.3 million, or 36 cents per share, in the year-ago period.
• The per-share results reflect a 24 percent increase in the number of shares outstanding in the 2008 quarter, to 52.7 million, from 42.5 million in the 2007 quarter.
• Revenue jumped 35 percent to $307.1 million, from $227.7 million in the first quarter of 2007.
• Analysts polled by Thomson Financial, on average, estimated earnings of 47 cents per share on revenue of $287.1 million.
• Revenue from the company's technology segment grew 71 percent, to $56.5 million, while sales from its corporate finance and restructuring division increased 28 percent, to $79.3 million. Revenue in this segment was driven by increasing demand from sectors affected by the housing downturn, such as building materials, retail, consumer durables and insurers, FTI said. There was also strong demand from the health care sector for both consulting and restructuring services.
• Strategic communications revenue grew 43 percent and economic consulting revenue gained 41 percent due to credit and liquidity issues and strategic merger-and-acquisition assignments.
• "The global credit crisis in its various forms continued to be a significant driver of work across all of our business segments," said Jack Dunn, president and chief executive, in a statement. "Subprime issues remained unresolved and the housing market continued to erode, undermining consumer net worth and confidence."
• The company closed seven acquisitions in the first quarter, and two additional acquisitions in the first week of April, adding more than 400 employees. Going forward, the company said it has a full acquisition pipeline and will continue to "aggressively" pursue acquisitions throughout 2008.
• FCN raised its full-year guidance above Wall Street's estimates, based on strong first-quarter results and current activity levels. The company now forecasts earnings for the year between $2.50 and $2.63 per share, on revenue of $1.3 billion to $1.38 billion. FTI previously said it expected a profit of between $2.40 and $2.50 per share on sales of $1.28 billion to $1.32 billion. Analysts polled by Thomson Financial, on average, estimate full-year earnings of $2.46 per share, on sales of $1.29 billion.
• TI said it is working to grow annual revenue to $2.5 billion by 2012, and generate 30 percent to 35 percent of its revenue internationally.

Over in the infrastructure group I am not that concerned on the quarter to quarter results since the projects are so long term in nature, but Wall Street is full of angst over every 90 day period so we need to be aware... Foster Wheeler (FWLT) seemed to have made the market gods happy for today at least. One very interesting comment I highlighted in purple below; North America "strikes again" - just cannot avoid the weakness.

• Engineering and construction company Foster Wheeler Ltd. said Wednesday its first-quarter profit rose 20 percent on a sharply improved performance by its power plant segment.
  
• Excluding a one-time asbestos-related gain of $14.2 million, Foster Wheeler earned $123.9 million, or 85 cents per share. Analysts polled by Thomson Financial expected, on average, earnings per share of 73 cents.
• Revenue climbed 56 percent to $1.8 billion, more than the $1.48 billion analysts were expecting.
• However, the company did note that lately it has noticed a change in the tone of the solid-fuel boiler market, primarily in North America. Solid-fuel boilers are used primarily by companies that produce electricity from coal, petroleum coke, biomass and other such fuels. "We are beginning to see instances of delays in certain projects that we view as prospects," said Chief Executive Raymond Milchovich, in a statement. The company's power group, which contributes about 30 percent of its annual revenue, produces these boilers that are used primarily by utilities.
• Milchovich said environmental considerations, along with cost inflation and slower economic growth in the North American market are some of the reasons for the delays. North America accounts for about 13 percent of the company's order backlog.

So once again, the United States of Subprime hits - even with companies with low exposure to North America. I prefer FWLT to some of the other names in the space due to a focus on international markets, but even their small exposure looks like will slow them down to some degree.

Both stocks are up 5-6% in early action; due to the "gap ups" in the chart (opening today at prices above anywhere the day before, creating a gap in the chart) I am going to take some money off the table in both in the $6-$8K range. FCN near $66, FWLT near $70.

Long FTI Consulting and Foster Wheeler in fund; no personal position