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Booz Allen (BAH) Up 3.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Booz Allen Hamilton (BAH - Free Report) . Shares have added about 3.4% in that time frame.

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 drivers.

Booz Allen Beats on Earnings and Revenues in Q2

Booz Allen reported strong second-quarter fiscal 2020 results, beating the Zacks Consensus Estimate on both earnings and revenues.

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.

Backlog & Headcount Increase Y/Y

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.

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 EPS guidance has been raised to $3-$3.1 from $2.9-$3.05 projected earlier. 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Booz Allen has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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