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A likely stimulus beneficiary: Navigant Consulting

by Ashley Bates
Feb 25, 2009


Creative Commons / Nataskart

Boston’s tunnel construction project known as the "Big Dig," pictured above, gained notoriety for grossly exceeding its budget. Firms like Navigant Consulting Inc. may have a key role to play in advising construction companies and helping to stem mismanagement.


Ashley Bates / Medill

Navigant Consulting has already reaped some benefits from the recession, including a spike in business from clients seeking assistance with credit litigation.

Proponents of the $32 billion marked for infrastructure spending in Congress’s $787 billion economic stimulus plan argue that this money will put Americans back to work on important, "shovel ready" projects. But opponents worry that it will funnel taxpayer money into an unaccountable bureaucratic vacuum.

Whether the legislation yields any disaster projects like Boston’s "Big Dig," a tunnel construction effort that ran almost $19 billion over budget, remains to be seen. However, one likely effect is an upsurge in business for Navigant Consulting Inc., a Chicago-based firm that offers its expertise to construction companies bidding for taxpayer dollars.

"I used to tell the story," Navigant Chairman and CEO William Goodyear said Tuesday in a conference call, "that about the only people who smiled with the Big Dig were the guys who went down into the tunnel every day and played cards and then came up at 5 o’clock—and Navigant."

Joe Alkire, an analyst with William Blair & Company LLC, said the economic stimulus plan "plays to Navigant’s sweet spot."

He explained, "I think there’s the potential for a lot more disputes to arise with complex construction projects. They could also be one of the prime beneficiaries of increased spending on energy efficiency and green technology."

The federal stimulus plan requires detailed reporting from companies seeking government contracts. Ensuring compliance with government regulations is one of Navigant’s strengths. Additionally, Navigant specializes in providing infrastructure and engineering expertise.

Navigant already has enjoyed a spike in business from construction companies, according to CEO Goodyear. 

For the fourth quarter ended Dec. 31 the company posted higher-than-expected earnings of $11.3 million for the quarter ended Dec. 31, which represented a 90 percent increase from the fourth quarter of the previous year.

Its stock gained 4 percent; at Wednesday's close of $12.21 it was selling at a price-earnings ratio of 17, in line with the 18 P/E of the Standard & Poor's 500 Index stocks.

The recession appears to be yielding another unexpected gain for Navigant. While its lawsuit advisory practice is down in general, its credit litigation arm— which used to be called "subprime litigation"— served 42 clients in the fourth quarter, compared with only six in the same period of 2007.

Despite its profits, Navigant was hurt by downturns in its investigations and financial services divisions as well as a drag from currency exchange rates. In the conference call, company officials announced plans to undertake cautious steps, including selective staffing reductions, a freeze on base salaries and a tightening of discretionary spending. 

Some Navigant competitors are struggling these days. Firms that specialize in mergers and acquisitions have been hit particularly hard. In mid-January CRA International Inc., based in Boston, reported profits of only $1.9 million for its fourth quarter ended Nov. 29. This compared with a profit of $10.3 million in its fourth quarter of 2007.

Goodyear commented that while Navigant has "the capability" to assist with mergers and acquisitions, it "does not have that focus."

Nevertheless, he declared, "We see some great opportunities out there. The question is when, not if."