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Why Booz Allen (BAH) Is Down 3.3% Since Last Earnings Report

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Shares of Booz Allen Hamilton Holding Corporation (BAH - Free Report) have declined 3.3% since its second-quarter fiscal 2020 earnings release on Nov 1, compared with 1.5% decline of the industry it belongs to.

The price decline can be mainly attributed to weak EPS guidance. Although the guidance has been raised to $3-$3.1 from $2.9-$3.05, the midpoint of the raised guided range ($3.05) is below the current Zacks Consensus Estimate of $3.11.

Let’s see the quarterly numbers in detail

Earnings, Revenues, Backlog & Headcount Increase Y/Y

Adjusted EPS of 81 cents beat the consensus mark by 15.7% and improved 19.1% on a year-over-year basis. Total revenues of $1.8 billion surpassed the Zacks Consensus Estimate by 2.9% and increased 12.7% year over year. Revenues excluding billable expenses were $1.3 billion, up 12.7% on a year-over-year basis. Billable expenses accounted for 30% of revenues.

Total backlog increased 7.2% from the prior-year quarter to $22.9 billion. Funded backlog of $4.4 billion improved 4.8%. Unfunded backlog was up 12.3% to $5.4 billion. Priced options went up 6.1% to $13.2 billion. Book-to-bill ratio was 2.68, down 26.8% year over year. Headcount of 26,984 increased 6.5% year over year.

Operating Performance Improves

Adjusted EBITDA of $191.7 million increased 17% year over year. Adjusted EBITDA margin on revenues increased to 10.5% from 10.2% in the year-ago quarter. Adjusted EBITDA margin on revenues, excluding billable expenses, increased to 15% from 14.4% in the year-ago quarter.

Adjusted operating income was $172 million, up 16.7% year over year. Adjusted operating income margin on revenues was 9.5%, up from the year-ago quarter figure of 9.1%. Adjusted operating income margin on revenues, excluding billable expenses, was 13.4% compared with 13% in the year-ago quarter.

Booz Allen Hamilton Holding Corporation Price, Consensus and EPS Surprise

Balance Sheet & Cash Flow

Booz Allen exited the fiscal second quarter with cash and cash equivalents of $781.5 million compared with $649.1 million at the end of the prior quarter. Long-term debt (net of current portion) was $2 billion, compared with $2.1 billion in the previous quarter. The company generated $215.7 million of net cash from operating activities. Capital expenditure was $32.6 million and free cash flow was $183.1 million.

It paid out dividend worth $32.4 million and repurchased shares worth $2.4 million in the reported quarter.

Fiscal 2020 Outlook

The company raised its revenue growth projection to 9-11%, from 6-9% expected earlier. Adjusted EBITDA margin on revenues is continued to be anticipated in the low 10% range. Operating cash flow is now expected in the range of $450-$500 million, compared with the previous expectation of $400-$450 million.

Zacks Rank and Other Stocks to Consider

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.

A few other top-ranked stocks in the broader Zacks Business Services sector are Global Payments (GPN - Free Report) , Mastercard (MA - Free Report) and Cardtronics (CATM - Free Report) . While Global Payments sports a Zacks Rank #1, Mastercard and Cardtronics carry a Zacks Rank #2.

Long-term expected EPS (three to five years) growth rate for Global Payments, Mastercard and Cardtronics is 17%, 16% and 4%, respectively.

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