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BAH Stock Gains 6.1% After Q2 Earnings Beat, Revenues Miss Estimates
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Key Takeaways
BAH's Q2 EPS rose 18.1% y/y to $1.76, beating estimates by 22.2%, despite a 3.9% revenue decline.
Booz Allen raised its fiscal 2027 EPS outlook to $6.50-$6.70, while total backlog grew 1.9% y/y to $40.93B.
BAH's National Security revenues grew 1%, while Civil and Commercial fell 15% year over year.
Booz Allen Hamilton Holding Corporation (BAH - Free Report) reported mixed second-quarter fiscal 2027 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same.
Earnings of $1.76 per share topped the Zacks Consensus Estimate by 22.2% and increased 18.1% year over year. The upside reflected strong contract execution, a lower tax rate, fewer outstanding shares and a divestiture-related gain.
Booz Allen Hamilton Holding Corporation Price, Consensus and EPS Surprise
Revenues of $2.78 billion missed the consensus estimate of $2.80 billion by 0.8% and declined 3.9% year over year. The decline reflected continued weakness in Civil and lower billable expenses. Total backlog increased 1.9% to $40.93 billion, while the quarterly book-to-bill ratio was 1.5.
However, the earnings beat and strong fiscal 2027 bottom-line guidance impressed investors, with the stock gaining 6.1% since the company released results on Oct. 23.
Booz Allen raised its fiscal 2027 adjusted earnings guidance to $6.50-$6.70 per share from the previous range of $6.00-$6.35. The Zacks Consensus Estimate is $6.35 per share for the same period.
BAH's Margins Improve Despite Lower Revenues
Adjusted EBITDA declined 3.4% year over year to $313 million. However, the adjusted EBITDA margin expanded 10 basis points to 11.3%, reflecting strong contract execution and the company's ongoing shift toward outcomes-based contracting.
Adjusted net income increased 15.3% to $211 million. Adjusted earnings benefited from a $10 million earn-out associated with the DARPA divestiture, alongside a lower tax rate and reduced share count.
Operating income declined to $245 million from $283 million a year earlier. General and administrative expenses increased to $328 million from $308 million, while depreciation and amortization expenses rose to $51 million from $41 million.
Booz Allen's National Security Business Advances
National Security revenues increased approximately 1% year over year to $2.08 billion. Excluding billable expenses, revenues grew approximately 6%, reflecting healthy demand for advanced technologies and continued execution of newly awarded programs.
Management highlighted improving hiring momentum, with more than 300 employees added to the National Security business during the quarter. The qualified opportunity pipeline expanded more than 20% year over year, supporting expectations of accelerating growth in the second half.
Civil and Commercial revenues declined approximately 15% to $702 million. The decrease reflected smaller follow-on contracts, reduced program scope and fewer new program starts. Management expects Civil revenues to remain flat to slightly lower sequentially during the third and fourth quarters as these pressures gradually ease.
BAH's Backlog Reflects Solid Demand
Funded backlog increased 5% year over year to $5.71 billion, while unfunded backlog declined to $10.41 billion from $10.67 billion. Priced options increased to $24.81 billion from $24.08 billion.
Management noted that National Security funded backlog grew 10%, supported by stronger funding activity toward the end of the government fiscal year. A large classified award contributed to quarterly bookings.
Despite these improvements, the federal funding environment remains uneven. Management indicated that procurement delays, particularly in Civil, continue to affect the timing of new awards and program starts.
Booz Allen Accelerates Strategic Investments
Booz Allen deployed $965 million in capital during the quarter. This included $729 million for the Ultra I&C Mission Solutions acquisition, $66 million in strategic venture investments and $170 million returned to its shareholders through dividends and share repurchases.
The Ultra acquisition strengthens the company's defense technology capabilities, particularly in command-and-control systems, autonomy and encryption. Management expects the acquired business to maintain strong revenue growth and margins above 20%.
The company is also expanding the cybersecurity product portfolio through Vellox, its agentic cyber platform. Its Guile product, designed to counter AI-enabled cyberattacks, reduced attack success rates by more than 95% in company testing and is undergoing private beta testing.
BAH's Cash Flow Declines, Leverage Increases
Net cash provided by operating activities declined 30.2% year over year to $294 million. Free cash flow decreased 33.4% to $263 million from $395 million, although management highlighted continued strong collections.
BAH ended the quarter with $334 million in cash and approximately $1.8 billion in total liquidity. Total debt stood at $4.41 billion, while the net leverage ratio increased to 3.3 from 2.5 a year earlier, reflecting increased borrowing following acquisitions.
Days sales outstanding increased 10 days year over year to 82, partly reflecting the impact of the Defy acquisition.
Booz Allen’s Other Fiscal 2027 Outlook
Booz Allen updated its revenue guidance to $11.3-$11.6 billion from $11.2-$11.7 billion, implying growth of 1-3%. Themidpoint ($11.45 billion) of the guided range is in line with the Zacks Consensus Estimate of $11.455 billion.
Adjusted EBITDA is projected between $1.26 billion and $1.29 billion compared with the previous range of $1.24-$1.29 billion.
Free cash flow guidance increased to $850-$925 million from $825-$925 million. Management expects National Security growth to accelerate in the second half, while increased investment spending, lower Civil volumes and normal seasonality are expected to pressure margins.
Equifax (EFX - Free Report) reported better-than-expected third-quarter 2026 results. EFX’s adjusted earnings per share of $2.26 outpaced the Zacks Consensus Estimate by 3.2% and increased 10.8% from the year-ago quarter. Equifax’s revenues of $1.69 billion marginally surpassed the consensus estimate and improved 9.6% year over year.
ManpowerGroup (MAN - Free Report) posted mixed third-quarter 2026 results. MAN’s adjusted earnings of $1.01 per share matched the consensus mark and rose 21.7% from the year-ago quarter. ManpowerGroup’s total revenues of $4.84 billion missed the consensus mark by 1.4% but increased 4.4% year over year.
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BAH Stock Gains 6.1% After Q2 Earnings Beat, Revenues Miss Estimates
Key Takeaways
Booz Allen Hamilton Holding Corporation (BAH - Free Report) reported mixed second-quarter fiscal 2027 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same.
Earnings of $1.76 per share topped the Zacks Consensus Estimate by 22.2% and increased 18.1% year over year. The upside reflected strong contract execution, a lower tax rate, fewer outstanding shares and a divestiture-related gain.
Booz Allen Hamilton Holding Corporation Price, Consensus and EPS Surprise
Booz Allen Hamilton Holding Corporation price-consensus-eps-surprise-chart | Booz Allen Hamilton Holding Corporation Quote
Revenues of $2.78 billion missed the consensus estimate of $2.80 billion by 0.8% and declined 3.9% year over year. The decline reflected continued weakness in Civil and lower billable expenses. Total backlog increased 1.9% to $40.93 billion, while the quarterly book-to-bill ratio was 1.5.
However, the earnings beat and strong fiscal 2027 bottom-line guidance impressed investors, with the stock gaining 6.1% since the company released results on Oct. 23.
Booz Allen raised its fiscal 2027 adjusted earnings guidance to $6.50-$6.70 per share from the previous range of $6.00-$6.35. The Zacks Consensus Estimate is $6.35 per share for the same period.
BAH's Margins Improve Despite Lower Revenues
Adjusted EBITDA declined 3.4% year over year to $313 million. However, the adjusted EBITDA margin expanded 10 basis points to 11.3%, reflecting strong contract execution and the company's ongoing shift toward outcomes-based contracting.
Adjusted net income increased 15.3% to $211 million. Adjusted earnings benefited from a $10 million earn-out associated with the DARPA divestiture, alongside a lower tax rate and reduced share count.
Operating income declined to $245 million from $283 million a year earlier. General and administrative expenses increased to $328 million from $308 million, while depreciation and amortization expenses rose to $51 million from $41 million.
Booz Allen's National Security Business Advances
National Security revenues increased approximately 1% year over year to $2.08 billion. Excluding billable expenses, revenues grew approximately 6%, reflecting healthy demand for advanced technologies and continued execution of newly awarded programs.
Management highlighted improving hiring momentum, with more than 300 employees added to the National Security business during the quarter. The qualified opportunity pipeline expanded more than 20% year over year, supporting expectations of accelerating growth in the second half.
Civil and Commercial revenues declined approximately 15% to $702 million. The decrease reflected smaller follow-on contracts, reduced program scope and fewer new program starts. Management expects Civil revenues to remain flat to slightly lower sequentially during the third and fourth quarters as these pressures gradually ease.
BAH's Backlog Reflects Solid Demand
Funded backlog increased 5% year over year to $5.71 billion, while unfunded backlog declined to $10.41 billion from $10.67 billion. Priced options increased to $24.81 billion from $24.08 billion.
Management noted that National Security funded backlog grew 10%, supported by stronger funding activity toward the end of the government fiscal year. A large classified award contributed to quarterly bookings.
Despite these improvements, the federal funding environment remains uneven. Management indicated that procurement delays, particularly in Civil, continue to affect the timing of new awards and program starts.
Booz Allen Accelerates Strategic Investments
Booz Allen deployed $965 million in capital during the quarter. This included $729 million for the Ultra I&C Mission Solutions acquisition, $66 million in strategic venture investments and $170 million returned to its shareholders through dividends and share repurchases.
The Ultra acquisition strengthens the company's defense technology capabilities, particularly in command-and-control systems, autonomy and encryption. Management expects the acquired business to maintain strong revenue growth and margins above 20%.
The company is also expanding the cybersecurity product portfolio through Vellox, its agentic cyber platform. Its Guile product, designed to counter AI-enabled cyberattacks, reduced attack success rates by more than 95% in company testing and is undergoing private beta testing.
BAH's Cash Flow Declines, Leverage Increases
Net cash provided by operating activities declined 30.2% year over year to $294 million. Free cash flow decreased 33.4% to $263 million from $395 million, although management highlighted continued strong collections.
BAH ended the quarter with $334 million in cash and approximately $1.8 billion in total liquidity. Total debt stood at $4.41 billion, while the net leverage ratio increased to 3.3 from 2.5 a year earlier, reflecting increased borrowing following acquisitions.
Days sales outstanding increased 10 days year over year to 82, partly reflecting the impact of the Defy acquisition.
Booz Allen’s Other Fiscal 2027 Outlook
Booz Allen updated its revenue guidance to $11.3-$11.6 billion from $11.2-$11.7 billion, implying growth of 1-3%. Themidpoint ($11.45 billion) of the guided range is in line with the Zacks Consensus Estimate of $11.455 billion.
Adjusted EBITDA is projected between $1.26 billion and $1.29 billion compared with the previous range of $1.24-$1.29 billion.
Free cash flow guidance increased to $850-$925 million from $825-$925 million. Management expects National Security growth to accelerate in the second half, while increased investment spending, lower Civil volumes and normal seasonality are expected to pressure margins.
Booz Allen currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Earnings Snapshots
Equifax (EFX - Free Report) reported better-than-expected third-quarter 2026 results. EFX’s adjusted earnings per share of $2.26 outpaced the Zacks Consensus Estimate by 3.2% and increased 10.8% from the year-ago quarter. Equifax’s revenues of $1.69 billion marginally surpassed the consensus estimate and improved 9.6% year over year.
ManpowerGroup (MAN - Free Report) posted mixed third-quarter 2026 results. MAN’s adjusted earnings of $1.01 per share matched the consensus mark and rose 21.7% from the year-ago quarter. ManpowerGroup’s total revenues of $4.84 billion missed the consensus mark by 1.4% but increased 4.4% year over year.