Back to top

Image: Bigstock

Booz Allen (BAH) Up on Transformation Moves, Debt Woe Stays

Read MoreHide Full Article

Booz Allen Hamilton Holding Corporation (BAH - Free Report) is currently benefiting from its transformation and innovation strategies while its balance sheet remains debt-heavy.

The company recently reported first-quarter fiscal 2021 adjusted earnings per share of $1.07 that beat the Zacks Consensus Estimate by 11.5% and increased 15.1% on a year-over-year basis. Total revenues of $2 billion missed the consensus mark by 1.6% but increased 1.7% on a year-over-year basis.

Booz Allen’s shares have declined 5.9% over the past year against 2.3% growth of the industry it belongs to.

How is Booz Allen Doing?

Vision 2020, Booz Allen’s transformation strategy aimed at creating sustainable expansion, has been fetching significant headcount and backlog growth. The strategy focuses on getting closer to clients’ core missions, increasing technical content of work, attracting and retaining talent from diverse areas of expertise, increasing innovation, creating a wide network of external partners and alliances, and expanding into commercial and international business. Its implementation has accelerated the company’s organic revenue growth and strengthened its profitability position.

Booz Allen has developed its solutions business in a way that it creates differentiated business models and sales channels, increases client acquisition and enhances future revenue opportunities. The company also differentiates itself in the talent market so as to ensure attraction and retention of quality talent from diverse disciplines. These initiatives bumped up its ability to bring a variety of offerings through which it has been winning highly technical, mission-critical work for its federal government business. All these ensure long-term sustainable growth for the company.

The company is focusing on areas such as artificial intelligence, advanced engineering, immersive technologies, secure mobility and modern digital platforms to drive innovation. It is developing mechanics and infrastructure for new and disruptive business models to enhance service quality and client satisfaction. Transformative solutions created by such efforts are expected to significantly enhance future revenue opportunities of the company.

Meanwhile, Booz Allen's cash and cash equivalent balance of $662 million at the end of the first quarter stayed well below the long-term debt of $2.8 billion, underscoring that the company does not have enough cash to meet this debt burden. The cash level can, however, meet the short-term debt of $78 million.

Zacks Rank and Stocks to Consider

Booz Allen currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Cross Country Healthcare (CCRN - Free Report) , Equifax (EFX - Free Report)  and TransUnion (TRU - Free Report) , each carrying a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for Cross Country Healthcare, Equifax and TransUnion is pegged at 9.9%, 15.2% and 22%, respectively.