3 Consulting Giants Capitalizing on Government Spending

NASDAQ: ICFI | ICF International, Inc. News, Ratings, and Charts

ICFI – The “knowledge economy” is a hot topic right now, but it has existed in another format for a very long time. Consulting services are growing as knowledge becomes more and more niche and specialized, and governments and businesses alike are turning to outside knowledge for strategy, operations, and IT help in running their businesses and services. ICF International, CRA International, and Huron Consulting Group are three of the top companies organizations turn to when the need to outsource key functions becomes a necessity.

There has been a lot of talk about the “knowledge economy” the past few years, especially in concert with the work from home trend brought on by the pandemic. Online courses of every ilk are available through companies like Udemy (UDMY) where you can get paid for selling your knowledge. 

But selling knowledge as a business model has been around for a lot longer than someone noticing the recent boom might think…it’s just given a fancier name, consulting. And companies like ICF International (ICFI)CRA International (CRAI) and Huron Consulting Group (HURN) are turning a pretty penny “selling knowledge”.

If you haven’t noticed, the U.S. government has been on a bit of a spending spree since the pandemic. Once budgets ramp up it’s generally very difficult to bring them under control. But one company not complaining about increased government spending, since the government is its largest customer, is ICF International (ICFI). 75% of ICFI revenue came from a combination of state, federal, and international governments in its latest quarter.

Through its 9,000 employees, ICF provides a range of data analytic, IT, digital modernization, and business management services. The company has been wracking up contract win on top of contract win recently, and has a stellar track record in a wide range of government agencies. (Once a contractor gets a foothold in a government agency, it is generally on the incumbent contractor to lose business, and ICFI is adept at maintaining those footholds.)

A few contract examples from the latest quarter: over $75 million from HHS (Health and Human Services) for digital modernization, $143 million from an unnamed U.S. health agency for $143 million of data science and analysis, and a $67 million contract with Immigration and Customs Enforcement to modernize technology. 

One of the benefits of these government contracts is that they are multi-year, providing a steady stream of profit, and once awarded they are very difficult to end early. It’s not like canceling your Netflix (NFLX) account. Not a bad business to be in if the economy slows next year.

In its latest earnings release ICF saw revenue climb 7% YoY to $502 million, net income rise 24%, and EBITDA increase 14%. Commenting on the quarter, CEO John Wasson said, “[C]ontract wins…reached a third quarter record of $875 million and included record federal government awards led by IT modernization, public health, and cybersecurity. Year-to-date contract awards increased 10%, and 70% of the dollar amount of the awards represented new business…” 

The company is also streamlining, exiting its commercial business in the U.K. during the last quarter, and focusing more and more on Energy, Environment and Infrastructure, as well as Health and Social Programs. This should lead to a more stable business without the ups and downs of the commercial market, which can have high margins, but is a much rockier earnings picture than government revenue. 

ICFI has an overall B rating in our POWR Ratings, with a score of 87.81%. It’s most highly rated on the Sentiment component, where it outranks close to 90% of the stocks in our database. 

In a similar vein, but with more of a regulatory focus, is CRA International (CRAI). CRA focuses on helping clients with financial matters when facing regulatory and legal proceedings, which are on the rise. Removing regulations does not seem to be a government strong point. 

While the current quarter wasn’t quite as strong as expected, the company grew revenue in 6 of 11 business lines, and raised its dividend by 17%. CRAI now has a PE ratio of 18, with operating margins right at 10%. 

With a composite rating of B, CRA is in the top 20% of the companies we track. Value and Quality are its top component ratings, where it scores over 83% and 87% respectively. 

Finally, a little smaller “knowledge” firm, but one that is growing rapidly, is Huron Consulting Group (HURN). Huron focuses on two business sectors, Healthcare and Education, and providing their customers with strategy and operations advice. 

Huron increased guidance in its latest reporting quarter, and is seeing strong growth. CEO Mark Hussey told investors, “Huron’s strong performance continued in the third quarter with revenues growing 26% over the prior year quarter and a ninth consecutive quarter of year-over-year margin expansion. In the first nine months of 2023, revenues grew organically across all three operating segments, led by 32% growth in the Healthcare segment, our largest business.”

Huron’s stock has been on a tear as well, increasing almost 50% in 2023 when a majority of non-mega cap tech stocks have underperformed the market. It may pay to wait for an entry on a pull back into the $90s for this stock which recently touched all time highs.

HURN comes in with a Sentiment Rating of A, and out paces over 99% of the stocks in our database with that score. It’s also highly rated in the Growth Component, and has an overall rating of B.

In an uncertain economy, with growth slowing, these consulting businesses are a great buffer with their extended government contracts. They have shown they can grow in difficult times as well, as governments (and commercial firms as well) have steadily increased the outsourcing of “knowledge” for a variety of reasons. They should be at the top of any investor’s list as steady and consistent businesses that can shine in any economic environment. 

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

ICFI shares were trading at $133.26 per share on Thursday afternoon, up $1.07 (+0.81%). Year-to-date, ICFI has gained 35.01%, versus a 15.72% rise in the benchmark S&P 500 index during the same period.

About the Author: Steven Adams

After earning a law degree cum laude with a focus on securities law, Steven worked as a Nasdaq market maker for a large broker dealer, and then as a trader for an arbitrage focused proprietary hedge fund. He subsequently worked as a consultant for a Fortune 500 consulting firm serving both government and commercial clients, including the NYSE, Prudential, FDIC, and NASA. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
ICFIGet RatingGet RatingGet Rating
CRAIGet RatingGet RatingGet Rating
HURNGet RatingGet RatingGet Rating
UDMYGet RatingGet RatingGet Rating
NFLXGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com

Upside Potential for This Bull Market?

The S&P 500 (SPY) is flirting with new highs once again. Thus a good time to ponder the upside potential for stocks into year end and then what is likely on tap in 2024. That is exactly what investment veteran Steve Reitmeister shares in the commentary below including a preview of his 11 favorite picks for today’s market. Read on below for more...

3 Biotech Stocks Bursting With Investment Potential

The biotech industry is well-positioned for robust growth thanks to the increasing demand for effective treatments for chronic diseases and the need to serve an aging population. To capitalize on the favorable industry trends, investing in quality biotech stocks Organogenesis Holdings (ORGO), Genmab A/S (GMAB), and Incyte (INCY) could be wise. Keep reading…

These 2 Stocks May Be the Best Bargains This Holiday Season

It’s the holiday season, and we’re all looking for the best deal from our retailers. But don’t forget to check the retail bin for some bargain stocks that may have been marked down, but are now worthy of their “sale” price. The stocks of Gap and American Outdoor Brands have had a tough run this past year in a tech frenzied market, but both retailers may be ready for some holiday cheer, and one of them is already on the move.

Tap into Massive Potential With These 3 Oil & Gas Stocks

Intensified geopolitical tensions and uncertainties coupled with OPEC+ supply cuts are contributing to potential upward pressure on global oil prices. To leverage this situation, one could invest in sound energy stocks Baker Hughes (BKR), Koninklijke Vopak (VOPKY), and NGL Energy Partners (NGL) for solid returns. Read on…

How to Profit Using The Probabilistic POWR Pairs Process

An example of grabbing gains from comparative performance with a lower risk China pairs trade on BIDU/PDD.

Read More Stories

More ICF International, Inc. (ICFI) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All ICFI News