FTI Consulting heads into its third-quarter report with a split personality. The top line has been doing its job, and the economic consulting business that dragged on results for more than a year finally turned higher last quarter. Yet profits have not kept pace. Margins compressed, overhead kept climbing, and management trimmed its full-year GAAP earnings outlook for the first time after two straight reaffirmations. The October 29 release, due before the market opens, is the first real chance to see whether the revenue story can start translating into earnings again.
The Street is asking for $2.65 a share on revenue of about $1.01 billion. That works out to sales growth of roughly 5.6% from a year ago but earnings growth of under 2%, a gap that captures the problem neatly: more work is coming in, but very little of it is reaching the bottom line. For the full year, management reaffirmed revenue of $3.94 billion to $4.10 billion and adjusted EPS of $9.10 to $9.70. Consensus sits at $9.10 on revenue of $4.02 billion, which puts analysts at the very bottom of the earnings range while comfortably mid-range on sales. That positioning tells you the market already doubts the company can convert revenue efficiently, and it leaves little cushion if costs surprise again.
The most important test is Compass Lexicon, the economic consulting unit. After posting an adjusted EBITDA loss in the first quarter, it delivered a sharp sequential recovery in the second, and management said it expects year-over-year growth in both revenue and adjusted EBITDA in the back half of the year. This quarter needs to show that turn in the comparisons, not just sequentially. A clean year-over-year gain would validate the claim that the segment has stopped being a drag. Technology, which rebounded strongly on merger second-request work, and Corporate Finance, where transformation and transactions engagements were growing quickly, are the other supports. Both are worth checking for durability, particularly since management flagged that faster antitrust clearances could shorten second-request engagements and that restructuring revenue slipped modestly last quarter.
The cost side is where the narrative is most vulnerable. Full-year SG&A guidance has crept higher at every turn, from about $45 million above 2025 originally to roughly $70 million now. Extraordinary litigation costs ran about 17 cents a share in the second quarter, and the case broadened in May with more expense expected in the second half. Add a newly flagged UK summer slowdown and Middle East disruption, neither of which management assumed would recover soon, and the margin picture could stay under pressure. Last quarter's adjusted EBITDA margin of 10.5%, down from 11.8% a year earlier, is the benchmark. Stabilization or improvement would go a long way. Another step down, or a further increase in the SG&A outlook, would challenge the guidance. The decision not to narrow the wide revenue range after the second quarter also bears watching; tightening it now would signal restored visibility.
The market has not been patient. Shares have fallen 8.8% since the last report while the S&P 500 gained 4.5%, and at about $151 the stock trades below its 200-day moving average near $160. It sits roughly in the middle of its post-earnings range of $129 to $167, a band set well below the prior quarter's peak above $186. Sentiment has also soured, with bearish readings rising to about 61% from 47% ahead of the last report. Expectations, in other words, have been reset lower, which lowers the bar for a relief move if the cost picture steadies.
Ultimately, this report hinges on operating leverage. If the Econ recovery shows up year over year and expenses stop ratcheting higher, the low end of the earnings range looks defensible and the bear case loses momentum. If margins slip again or legal and overhead costs keep expanding, another guidance trim becomes a real possibility, and solid revenue growth alone will not be enough to change the story.