Which Sectors Are Driving Consulting Firms' Growth?

Which Sectors Are Driving Consulting Firms' Growth?

New opportunities are coming to consulting firms as increased regulatory scrutiny and more frequent corporate litigation have become a solid source of revenue. The management teams of public companies face increasing external pressure in the form of active investigations by government auditors and authorities, including the Department of Justice and the Securities and Exchange Commission.

This service sector is highly fragmented, however; no single consulting company possesses the market share to rule the industry. As a result, price competition puts pressure on the firms' margins, making them expand their services.

Three companies are looking for growth. What sectors are they aiming at?

FTI Consulting: Expanding in insurance
One company fighting for a bigger piece of the pie is FTI Consulting , which focuses on helping organizations in five areas: corporate finance, forensics and litigation, economics, technology, and strategic communications.

The third quarter was positive for the company, showing a revenue increase of 7.4% to $414.6 million from $386.1 million in the same quarter last year. A big driver was economic consulting in North America and Europe, which grew revenue by 17.3%. The health solutions practice was the star, though, with 24.4% revenue growth.

In line with FTI Consulting's international expansion plans, the recent acquisition of Distinct Business Consulting will strengthen its global insurance practice business. FTI got 41 professionals out of the deal, leveraging Direct Business' human capital and benefiting from their rich know-how.

Moreover, as the evolving global markets make structural change a necessity, the company's specialized consulting should benefit. There will likely be increasing demand for the protection of intellectual property rights, merger and acquisition transformation, divestiture, and other restructuring activities.

Navigant Consulting: Health care reform pushes sales
The second company is Navigant Consulting , which focuses on customers in industries undergoing substantial regulatory and structural changes.

The company posted a strong third quarter in 2013 with a 4.7% increase in revenue compared to the same quarter last year. However, net income decreased to $10.2 million from $11.4 million in the year-ago quarter.

Health care reform is driving new opportunities for Navigant, which will help the industry improve its profitability and deal with the increasing regulatory pressures. A series of acquisitions that include EthosPartners Healthcare Management, Paragon Health, and Easton Associates gives the company enough know-how to achieve its operational goals.

The company's energy practice is growing as well, offering services related to energy efficiency, smart grids, and renewable energy. These areas have a promising future ahead, and Navigant is in a position to profit from them in the near term.

CRA International: Litigation and regulatory consulting lead growth
Finally, we have CRA International , which offers economic, financial, and management consulting services, as well as analytic techniques.

The third quarter has also been strong for CRA International, driven by broad-based demand and positive contributions from nearly all of its practice areas. The company's litigation and regulatory practice has been especially active. Revenue reached $74.4 million, compared to $65.9 million in the year-ago quarter.

CRA International is offering more robust services than it did a year ago, focusing on generating balanced and profitable growth. The company's senior consultants hold advanced degrees and are recognized experts. These consultants, along with the company's clients, remain the two main pillars of expansion for CRA International.

A weak point for this company is its low customer growth. Over the years, customer growth has slowed down significantly, as the potential customers are reluctant to add consulting services when budgets are tight.

Bottom line
Navigant's strategy to grow in the health care and energy markets seems appropriate and should drive earnings higher in the upcoming quarters.

CRA International and FTI Consulting's performance should be in line with the broader consulting market. In the case of CRA International, however, its slow client growth is something to worry about and is a variable to keep a close eye on. The outlook is more promising for FTI Consulting, driven by its economic and specialized consulting as well as its recent acquisition in insurance.

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The article Which Sectors Are Driving Consulting Firms' Growth? originally appeared on Fool.com.

Louie Grint has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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