A month has gone by since the last earnings report for Booz Allen Hamilton (BAH). Shares have added about 0.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Booz Allen due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Booz Allen Beats on Earnings and Revenues in Q4
Booz Allenreported strong fourth-quarter fiscal 2020 results, with earnings and revenues beating the Zacks Consensus Estimate.
Adjusted earnings per share (excluding 25 cents from non-recurring items) of 73 cents beat the consensus mark by 4.3% and improved 14.1% on a year-over-year basis. The bottom line benefited from top-line growth, strong contract level performance and operational management.
Revenues, Backlog & Headcount Increase Y/Y
Total revenues of $1.97 billion surpassed the Zacks Consensus Estimate by 1.5% and increased 10.6% year over year. Revenues, excluding billable expenses, were $1.36 billion that increased 9.8% on a year-over-year basis. Billable expenses accounted for 31% of revenues.
Total backlog increased 7.3% from the prior-year quarter’s figure to $20.7 billion. Funded backlog of $3.42 billion fell slightly year over year. Unfunded backlog was up 22.5% to $4.52 billion. Priced options went up 4.9% to $12.8 billion. Book-to-bill ratio was 0.38, up 5.6% year over year. Headcount of 27,173 increased 4.2% year over year.
Adjusted EBITDA for the fiscal year amounted to $754.1 million, up 11.8% year over year. Adjusted EBITDA margin on revenues increased to 8.8% from 8.6% in the year-ago quarter. Adjusted EBITDA margin on revenues, excluding billable expenses, increased to 12.7% from 12.4% in the year-ago quarter. Operating income was $669.2 million, up 11.1% year over year. Adjusted operating income margin on revenues was 7.7%, up from the year-ago quarter’s figure of 7.5%. Adjusted operating income margin on revenues, excluding billable expenses, was 11.1% compared with 10.8% in the year-ago quarter.
Balance Sheet & Cash Flow
Booz Allen Hamilton exited the fiscal fourth quarter with cash and cash equivalents of $450.8 million compared with $741.9 million at the end of the prior quarter. Long-term debt (net of current portion) was $2 billion roughly flat with the previous quarter. The company generated $184.9 million of net cash from operating activities. Capital expenditure was $37.4 million and free cash flow was $147.6 million for the March end quarter. The company paid out dividend worth $43.6 million and repurchased shares worth $145 million in the reported quarter.
Fiscal 2021 Outlook
The company lowered its revenue growth projection to 6-10% from 10-11.5% expected earlier. The adjusted earnings per share guidance has been raised to $3.40-$3.60 from $3.05-$3.15 guided earlier. Adjusted EBITDA margin on revenues is anticipated to be 10%. Operating cash flow is now expected in the range of $550-$600 million compared with the previous expectation of $500-$550 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 5.55% due to these changes.
Currently, Booz Allen has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Booz Allen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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