Bears Populate FTI Consulting as Shares Hemorrhage on Reduced Earnings Outlook

FCN – FTI Consulting, Inc. – Shares of business advisory firm, FTI Consulting, Inc., plunged 27.1% to touch an intraday and new 52-week low of $31.53 after the company cut its outlook for the year and revealed second-quarter results are likely to disappoint. The stock is currently trading 26.45% lower on the day to stand at $31.83 as of 11:10 am (ET). The consulting company, and provider of forensic accounting in the Madoff Ponzi scheme, said Tuesday it expects to earn $0.50 to $0.55 a share in the second quarter, which is drastically lower than the average earnings of $0.75 a share anticipated by analysts. FTI Consulting also slashed its full year earnings outlook estimated in February from $3.00 to $3.25 a share to its new forecast of $2.50 to $2.80 per share. The firm’s significantly reduced outlook for the year inspired analysts at both Oppenheimer & Co. and William Blair & Co. to cut their ratings on FCN to ‘market perform’ from ‘outperform’ today. Options investors were quick to initiate near-term bearish transactions on the stock. Traders bracing for continued erosion in the price of the underlying stock purchased at least 1,100 puts at the July $30 strike for an average premium of $0.33 per contract. Put buyers at this strike are positioned to profit should shares decline 5.9% from the intraday low of $31.53 to breach the average breakeven point to the downside at $29.67 by July expiration. Other pessimistic players sold 1,000 calls at the July $35 strike to pocket an average premium of $0.68 per contract. Call sellers keep the full premium received on the transaction as long as FCN’s shares fail to trade above $35.00 by expiration day. The overall reading of options implied volatility on the stock shot up 41.6% to 51.47% by 11:25 am (ET).

About Andrew Wilkinson 1023 Articles

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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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