Core Viewpoint - Goldman Sachs analyst Noah Poponak downgraded Booz Allen Hamilton from Neutral to Sell, lowering the price forecast from $108 to $94, citing limited revenue and earnings growth in the medium term and ongoing valuation risks [1]. Group 1: Revenue and Earnings Outlook - Medium-term revenue growth is now expected to be closer to flat due to pressure on federal civilian spending and shifting priorities within the U.S. Department of Defense [2]. - Organic revenue growth for Booz Allen Hamilton is anticipated to be flat for the next few years, which may take time for the stock to absorb after its previous strong growth [4]. Group 2: Contracting and Margins - The analyst highlights a shift toward more outcomes-based and fixed-price contracting in the sector, raising concerns about increased risk for contractors and potential pressure on margins [4]. - Federal civilian agency budgets are under pressure, with other government spending areas taking priority, which may impact Booz Allen Hamilton's performance [3]. Group 3: Market Reaction - Booz Allen Hamilton shares closed down by 4.70% to $104.66 following the downgrade [5].

Core Viewpoint - Booz Allen Hamilton's shares have experienced significant volatility following a downgrade by Goldman Sachs, reflecting concerns over medium-term earnings growth and revenue projections [1][2][3] Group 1: Stock Performance - Shares of Booz Allen Hamilton fell by as much as 4.9% before recovering slightly to a 4% decline [1] - The stock had previously sold off by a double-digit percentage after the fiscal-fourth-quarter earnings release [1] Group 2: Analyst Downgrade - Goldman Sachs downgraded Booz Allen Hamilton from neutral to sell, lowering the price target from $108 to $94 [2] - The current stock price is noted at $104.75 [2] Group 3: Earnings Growth Outlook - Goldman Sachs analysts project medium-term earnings growth for Booz Allen as "flat," with revenue growth expected between 0% and 4% for fiscal 2026, down from 12.4% last year [3] - Adjusted earnings are projected to be in the range of $6.20 to $6.55, compared to $6.35 last year [3] Group 4: Long-term Growth Potential - Despite short-term challenges, there is a high likelihood that Booz Allen's growth will resume after this year, particularly if the civil business stabilizes [6][7] - The defense and intelligence sectors, which account for 65% of revenue, are expected to grow in double digits, supporting overall company growth [6] - Historically, Booz Allen has achieved an 11.7% organic growth rate over the past three years [6] - If growth resumes, the P/E multiple could return to the low-20s, which has been the average over the past decade [7]

Core Insights - Booz Allen Hamilton Holding Corp. (BAH) reported mixed fourth-quarter fiscal 2025 results, with earnings exceeding estimates while revenues fell short [1][2] Financial Performance - Adjusted earnings per share were $1.61, surpassing the Zacks Consensus Estimate by 1.3% and increasing 21.1% year-over-year [2] - Revenues totaled $2.3 billion, missing the consensus estimate by 1.5% but showing a year-over-year increase of 7.3% [2] - Excluding billable expenses, revenues were $2.05 billion, reflecting a 6.2% year-over-year growth [2] Backlog and Book-to-Bill Ratio - Total backlog increased by 14.8% year-over-year to $37 billion, although it fell short of the estimated $38.7 billion [3] - Funded backlog rose 5.6% to $4.4 billion, missing the anticipated $4.9 billion, while unfunded backlog increased by 4.9% to $8.8 billion, also below the estimate of $9.8 billion [3] - Priced options grew by 21.9% to $23.8 billion, slightly missing the expectation of $23.9 billion [4] - The book-to-bill ratio improved to 1.39 from 1.22 in the previous year [4] EBITDA and Margins - Adjusted EBITDA reached $1.32 billion, an 11.9% increase from the prior year, aligning with estimates [5] - The adjusted EBITDA margin remained flat at 11% year-over-year [5] Balance Sheet and Cash Flow - Cash and cash equivalents at the end of the quarter were $885 million, up from $554 million in the previous quarter [6] - Long-term debt increased by 16.9% year-over-year to $3.9 billion [6] - The company generated $218 million in net cash from operating activities, with capital expenditures of $1.2 billion and free cash flow of $911 million [6] Fiscal 2026 Outlook - For fiscal 2026, BAH anticipates revenues between $12 billion and $12.5 billion, with expected growth of 0-4% [7] - Adjusted EPS is projected to be between $700 million and $800 million, with capital expenditures around $110 million [7]

Core Viewpoint - Booz Allen Hamilton Holding Corp. generates approximately 97% of its revenue from the federal government, leading to significant stock performance fluctuations due to government budget uncertainties [1][2]. Group 1: Financial Performance - Booz Allen Hamilton's stock has seen a total return of over 500% in the last 10 years, but it is down more than 16% in the last 12 months [1]. - The company's earnings per share (EPS) has increased at a compounded annual growth rate (CAGR) of 14.5% over the past five years, while revenue has grown at a CAGR of 10.1% [7]. - The company maintains a 50% operating margin, indicating strong profitability as revenue expands [8]. Group 2: Market Position and Valuation - Booz Allen Hamilton is positioned as the federal government's leading artificial intelligence (AI) provider, giving it a competitive advantage [2][3]. - The stock is currently trading at a price-to-earnings (P/E) ratio of around 19x, which is below the sector average of approximately 29x for defense and aerospace stocks [9]. - The stock is also trading at a discount to its historical P/E ratios over the last five years, suggesting it may be undervalued [10]. Group 3: Upcoming Events and Expectations - The company's fourth quarter earnings report for fiscal year 2025 is scheduled for May 23, 2025, which may reflect some weakness but is expected to provide appealing forward guidance [6][3]. - Recent performance indicates that the stock is approaching its 200-day simple moving average at $137.70, and a strong earnings report could lead to a reassessment of current price targets by analysts [11].

Core Insights - Booz Allen Hamilton (BAH) reported revenue of $2.97 billion for the quarter ended March 2025, reflecting a year-over-year increase of 7.3% [1] - Earnings per share (EPS) for the quarter was $1.61, up from $1.33 in the same quarter last year, indicating a positive trend in profitability [1] - The reported revenue was below the Zacks Consensus Estimate of $3.02 billion by 1.50%, while the EPS exceeded the consensus estimate of $1.59 by 1.26% [1] Financial Performance Metrics - Total backlog for Booz Allen stood at $37.03 billion, which was below the two-analyst average estimate of $38.61 billion [4] - Revenue from U.S. Government Defense Clients was $1.53 billion, surpassing the average estimate of $1.50 billion, with a year-over-year increase of 14.2% [4] - Revenue from U.S. Government Civil Clients was reported at $989 million, below the average estimate of $1.03 billion, reflecting a year-over-year increase of 4.7% [4] - Revenue from U.S. Government Intelligence Clients was $458 million, which was lower than the average estimate of $496.32 million, with a year-over-year increase of 3% [4] Stock Performance - Booz Allen's shares have returned +8.2% over the past month, compared to a +10.7% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - For fiscal year 2025, the company achieved over 12% revenue growth, nearly all organic, and adjusted EBITDA increased 12% to $1,315 million, yielding an adjusted EBITDA margin of 11% [29][30] - Adjusted diluted earnings per share grew over 15%, driven by increased profitability and a lower share count, with diluted earnings per share at $1.52, a 55% increase year over year [38][39] - Free cash flow for the quarter was $194 million, resulting from $218 million of cash from operations, less $24 million of CapEx [39] Business Line Data and Key Metrics Changes - The defense and intelligence businesses saw revenue growth of 145% year over year, while the civil business experienced flat revenue in the fourth quarter [32][35] - The company anticipates a low double-digit revenue decline in the civil business for fiscal year 2026 due to a slowdown in procurement and spending [35][42] - The AI business grew over 30% year over year to approximately $800 million, indicating strong demand and increasing integration into government operations [19][30] Market Data and Key Metrics Changes - The company ended the fiscal year with a record backlog of $37 billion, up 15% year over year, and a qualified pipeline for fiscal year 2026 of $53.4 billion [35][36] - The book-to-bill ratio for the quarter was 0.71 times, in line with historical averages, while the trailing twelve-month book-to-bill ratio was 1.39 times, above the trailing five-year average of 1.28 times [35][36] Company Strategy and Development Direction - The company is focusing on restructuring its civil business to return to growth rapidly after an adjustment period, while also positioning itself to lead in outcome-based opportunities [23][42] - The Vault strategy, which emphasizes velocity, leadership, and technology, aligns with government changes and aims to enhance mission acceleration and efficiency [18][26] - The company is committed to investing in advanced technologies, particularly AI, and strengthening partnerships with technology firms to drive innovation [20][24] Management's Comments on Operating Environment and Future Outlook - Management noted that the federal government is rethinking agency missions and looking for ways to reduce spending and increase efficiency, which has led to a slowdown in civil procurement [10][11] - The defense and national security portfolio is expected to continue growing, driven by the injection of AI and commercial technology into missions [11][12] - Management expressed optimism about future opportunities, particularly in AI and advanced technology, despite the challenges in the civil business [26][45] Other Important Information - The company plans to deploy $700 million to $800 million in free cash flow for fiscal year 2026, with expectations of a meaningful reacceleration in the second half of the year [44][45] - The board of directors approved a quarterly dividend of 55 cents per share, payable on June 27 [41] Q&A Session Summary Question: How does the company manage the impact of unpredictable descoping and cancellations? - Management highlighted the strength in defense and intelligence sectors, while acknowledging a reset in the civil business, which is expected to be a one-time adjustment [50][51] Question: What are the expectations for the multiyear growth environment? - Management indicated that the civil business has undergone most reviews positively, while defense spending is expected to increase, particularly in Indo-Pacific and homeland defense [58][59] Question: How does the company plan to invest in commercial terms in defense? - Management emphasized the importance of partnerships with commercial technology firms and the ability to co-create solutions that meet mission needs [85][86] Question: What is the company's strategy regarding share repurchases and capital deployment? - Management confirmed a commitment to share repurchases and strategic investments, particularly in venture capital to support technology advancements [64][66] Question: How does the company view its branding and public perception? - Management acknowledged the challenges of being a market leader in media coverage but emphasized efforts to improve communication and clarify the company's positioning as an advanced technology firm [90][92]

Financial Data and Key Metrics Changes - For fiscal year 2025, the company achieved over 12% revenue growth, nearly all organic, with adjusted EBITDA increasing 12% to $1,315 million, yielding an adjusted EBITDA margin of 11% [30][31] - Adjusted diluted earnings per share grew over 15%, driven by increased profitability and a lower share count, with diluted earnings per share at $1.52, a 55% increase year over year [38][39] - Free cash flow for the quarter was $194 million, resulting from $218 million of cash from operations, less $24 million of CapEx [39] Business Line Data and Key Metrics Changes - The defense and intelligence businesses saw significant growth, with revenue up 145% year over year, while the civil business experienced flat revenue in Q4 and is expected to decline in the low double digits in FY 2026 [33][35] - The AI business grew over 30% year over year to approximately $800 million, indicating strong demand and increasing integration into government operations [18][19] Market Data and Key Metrics Changes - The company ended the fiscal year with a record year-end backlog of $37 billion, up 15% year over year, and a qualified pipeline for FY 2026 of $53.4 billion [35][36] - The book-to-bill ratio for the quarter was 0.71 times, in line with historical averages, while the trailing twelve-month book-to-bill ratio was 1.39 times, above the trailing five-year average of 1.28 times [35] Company Strategy and Development Direction - The company is restructuring its civil business to return to growth rapidly after a reset period, while focusing on capturing major outcome-based opportunities [22][23] - The Vault strategy, emphasizing velocity, leadership, and technology, aligns with government changes, particularly in AI and advanced technology [17][24] Management's Comments on Operating Environment and Future Outlook - Management noted a near-term disruption in the civil business due to government spending reductions and procurement slowdowns, but expressed optimism about growth opportunities in defense and intelligence sectors [10][29] - The outlook for FY 2026 anticipates revenue between $12 billion and $12.5 billion, with adjusted EBITDA in the range of $1,315 million to $1,370 million, maintaining an adjusted EBITDA margin of about 11% [42] Other Important Information - The company plans to make targeted cost and headcount reductions to match anticipated demand, with an expected 7% reduction in staff concentrated in the civil business [12][37] - The board of directors approved a quarterly dividend of 55¢ per share, payable on June 27, reflecting a strong balance sheet and commitment to shareholder value [41] Q&A Session Summary Question: How does the company manage the impact of unpredictable descoping and cancellations? - Management highlighted the dual dynamics of a reset in the civil business and continued strength in defense and intelligence, indicating a proactive restructuring to position for growth [47][48] Question: What are the expectations for the multiyear growth environment, particularly in defense and civil? - The company noted a significant increase in defense spending and a focus on technology integration, while the civil business is undergoing a reset with positive reviews of their technology [55][56] Question: How does the company plan to address the low double-digit decline in the civil business? - Management indicated that the civil business has undergone most reviews positively, and they expect growth to resume as new opportunities arise in the second half of the fiscal year [68][73] Question: How does the company view its branding and perception in the market? - Management acknowledged being a market leader attracts attention, and they are working to improve communication about their advanced technology capabilities [88][90] Question: What is the outlook for the AI business and its future programs? - The company remains optimistic about its AI business, emphasizing its integration into various missions and the potential for significant growth in the sector [99][100]

Core Insights - Booz Allen Hamilton (BAH) reported quarterly earnings of $1.61 per share, exceeding the Zacks Consensus Estimate of $1.59 per share, and up from $1.33 per share a year ago, indicating an earnings surprise of 1.26% [1] - The company posted revenues of $2.97 billion for the quarter ended March 2025, which was below the Zacks Consensus Estimate by 1.50%, but up from $2.77 billion year-over-year [2] - Booz Allen has surpassed consensus EPS estimates three times over the last four quarters, while also topping revenue estimates three times in the same period [2] Earnings Outlook - The sustainability of Booz Allen's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $1.63 on revenues of $3.16 billion, and for the current fiscal year, it is $6.87 on revenues of $12.78 billion [7] Industry Context - The Consulting Services industry, to which Booz Allen belongs, is currently ranked in the bottom 36% of over 250 Zacks industries, which may negatively impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5]

FY25 Performance Highlights - Booz Allen Hamilton achieved excellent FY25 performance with double-digit growth on both top and bottom lines[10] - Revenue reached $12 billion, a 12.4% increase year-over-year[11, 31] - Adjusted EBITDA was $1.315 billion, up 11.9% year-over-year, with an Adjusted EBITDA margin of 11.0%[11, 31] - Adjusted Diluted EPS increased by 15.5% to $6.35[11, 31] - The company's LTM Book-to-Bill ratio was 1.39x, and Backlog increased by 15.3% to $37 billion[11] Q4 FY25 Financial Results - Revenue for Q4 FY25 was $3 billion, a 7.3% increase compared to Q4 FY24[19, 31] - Adjusted EBITDA for Q4 FY25 was $316 million, a 10.5% increase compared to Q4 FY24, with an Adjusted EBITDA margin of 10.6%[19, 31] - Adjusted Diluted EPS for Q4 FY25 was $1.61, a 21.1% increase compared to Q4 FY24[19, 31] - Free Cash Flow for Q4 FY25 was $194 million, a 51.6% increase compared to Q4 FY24[19, 31] FY26 Financial Outlook - The company initiated FY26 revenue guidance of $12.0 - $12.5 billion, representing a year-over-year growth of 0 - 4.0%[28] - Adjusted EBITDA is projected to be $1.315 - $1.370 billion, with a margin of approximately 11%[28] - Adjusted Diluted EPS is expected to be $6.20 - $6.55[28] - Free Cash Flow is projected to be $700 - $800 million[28]

Financial Performance and Risks - The company may not realize the full value of its backlog, which could lead to lower than expected revenue due to various contingencies [91]. - The funded backlog is subject to change based on congressional appropriations and U.S. government policies, which may impact the total backlog and financial performance [92]. - The actual receipt of revenue from contracts in backlog may be delayed or may never occur due to funding issues or program changes [91]. - Global inflationary pressures and increased tariffs are raising costs for goods and services, potentially leading to significant cost overruns on fixed-price contracts [115]. - Economic instability and weakening credit markets may negatively impact customer spending, reducing demand for the company's services [116]. - The company may experience delays in the collection of receivables, adversely affecting cash flow and working capital [140]. - A delay in the U.S. government's budget process could reduce the company's backlog and adversely affect revenue and operating results [126]. - The company may incur additional debt and face operational disruptions due to acquisitions or investments, impacting future earnings [146]. - The company’s financial results may vary significantly from period to period due to external factors, which could affect the market price of its common stock [192]. - The company may not be able to declare future dividends, which could negatively affect the market price of its common stock [195]. Cybersecurity and Compliance Risks - Cybersecurity threats have increased in frequency and sophistication, posing risks to the company's reputation and future contract win rates [93]. - The company develops technologies designed to prevent and monitor threats, which may expose it to financial loss or reputational harm if successful attacks occur [94]. - Compliance with data privacy and cybersecurity laws may require significant investments and could result in liabilities for noncompliance [101]. - The company is subject to additional regulatory compliance requirements under DFARS and CMMC, which could impact contract eligibility and revenue [103]. - The company faces risks related to potential security breaches that could harm its reputation and lead to significant remediation costs [100]. - Insufficient insurance coverage for cyber threats could result in significant legal and other costs, adversely affecting business operations [99]. - Legal and regulatory compliance is critical, with potential penalties including fines, contract terminations, and debarment from U.S. government contracts [145]. - Increased regulatory scrutiny has led to a higher risk of audits and investigations, which could result in civil or criminal penalties [149]. - The company is subject to various laws and regulations, including the FAR and the False Claims Act, which impose strict compliance requirements [147]. - Non-compliance with anti-corruption laws, such as the FCPA, could result in substantial civil and criminal penalties, affecting business operations [158]. Competition and Market Dynamics - The company faces significant competition in AI development, which could adversely affect its business if competitors develop superior or more cost-effective technologies [106]. - The company may struggle to attract and retain skilled employees due to intense competition and lengthy security clearance processes, which could impair revenue generation and growth strategy execution [107]. - The company relies on strong relationships with other contractors, and failure to maintain these relationships could adversely affect business operations and results [122]. - The U.S. government may restrict certain procurements to small or small disadvantaged businesses, limiting the company's opportunities to bid as a prime contractor [170]. - U.S. government efforts to revise organizational conflict of interest rules may limit the company's ability to compete for new contracts, adversely affecting operational results [159]. - The company may be adversely affected by the U.S. government's preference for small businesses, which could limit its ability to compete for certain contracts [170]. Acquisitions and Growth Strategies - The company is focused on expanding its presence in addressable markets by acquiring new customers and developing new capabilities, which entails inherent risks [132]. - Acquisitions may require the company to issue common stock or incur additional debt, resulting in ownership dilution or increased debt leverage [141]. - The company may face challenges in integrating acquired businesses, which could diminish the strategic value of transactions [142]. - The company continually monitors U.S. government spending to align investments in new capabilities and selectively pursue acquisitions, which involve numerous risks [141]. Debt and Financial Management - As of March 31, 2025, the company had total indebtedness of approximately $4.0 billion and $1.0 billion available under its revolving credit facility [175]. - The company’s substantial indebtedness could limit its ability to obtain additional financing and require a significant portion of cash flows to be dedicated to debt service payments [175]. - A $1.5 billion term loan facility is outstanding, and a quarter-point change in interest rates would result in a $2 million change in projected annual interest expense [189]. - The company is exposed to interest rate risk due to variable rate borrowings, with interest rates having increased significantly during 2022 and 2023 [188]. - The company’s ability to generate sufficient cash flows to service its debt obligations is subject to prevailing economic and competitive conditions [177]. - The agreements governing the company’s indebtedness impose significant operating and financial restrictions, potentially hindering its ability to grow [182]. - A downgrade or withdrawal of the company’s credit rating could make it more difficult to obtain additional debt financing in the future [190]. Operational and Strategic Risks - Internal system failures or those of vendors could disrupt business operations, leading to material adverse effects on results [96]. - The company may incur liability due to potential violations of laws and regulations related to AI, impacting its ability to deliver AI-driven solutions [104]. - The loss of key personnel could impair the company's ability to perform required services and secure new contracts [110]. - The company may face misconduct risks from employees or subcontractors, which could lead to legal penalties and reputational harm [119]. - The company relies on subcontractors for portions of service delivery, which poses risks to operating results and future growth if subcontractors fail to perform their obligations [123]. - The company faces significant risk exposures that may not be adequately covered by insurance, particularly related to advanced defense and technology systems [128]. - Geopolitical events, such as the conflict between Russia and Ukraine, may create economic uncertainties that adversely affect business operations [154]. - The U.S. government has imposed enhanced export controls and sanctions that could impact the company's supply chain and business partners [155]. - International operations expose the company to risks including political instability, inconsistent laws, and compliance with foreign regulations [156]. - Proposed regulatory changes could require the Department of Defense to impose contractual withholding based on assessments of the company's business systems, impacting cash flow [167]. - The company may face increased scrutiny and potential penalties if its financial management systems do not comply with government requirements, which could delay contract performance and affect cash flow [167]. - The company is subject to audits and reviews by U.S. government agencies, which could result in increased payment withholding and adversely affect cash flow if significant internal control deficiencies are identified [166].