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Booz Allen Hamilton (BAH) Beats on Q3 Earnings and Revenues

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Booz Allen Hamilton Holding Corporation BAH reported strong third-quarter fiscal 2020 results, beating the Zacks Consensus Estimate on both earnings and revenues.

Adjusted EPS of 80 cents beat the consensus mark by 5.3% and improved 11.1% on a year-over-year basis. The bottom line benefited from top-line growth, strong contract level performance, efficient management of business and an ongoing shift toward higher-margin technically focused work.

Shares of the company have gained 48.3% over the past year, significantly outperforming the 31.1% growth of the industry it belongs to.

Revenues, Backlog & Headcount Increase Y/Y

Total revenues of $1.85 billion surpassed the Zacks Consensus Estimate by 1.6% and increased 11.2% year over year. Revenues, excluding billable expenses were $1.25 billion, up 8.3% on a year-over-year basis. Billable expenses accounted for 32% of revenues.

Total backlog increased 7.3% from the prior-year quarter to $22 billion. Funded backlog of $3.52 billion decreased slightly year over year. Unfunded backlog was up 17.9% to $5.31 billion. Priced options went up 5.8% to $13.13 billion. Book-to-bill ratio was 0.48, up 6.7% year over year. Headcount of 27,176 increased 5.3% year over year.

Booz Allen Hamilton Holding Corporation Revenue (TTM)

Operating Performance Improves

Adjusted EBITDA of $190.8 million increased 6.2% year over year. Adjusted EBITDA margin on revenues decreased to 10.3% from 10.8% in the year-ago quarter. Adjusted EBITDA margin on revenues, excluding billable expenses, decreased to 15.3% from 15.6% in the year-ago quarter.

Adjusted operating income was $170.1 million, up 6.2% year over year. Adjusted operating income margin on revenues was 9.2%, down from the year-ago quarter’s figure of 9.7%. Adjusted operating income margin on revenues, excluding billable expenses, was 13.6% compared with 14% in the year-ago quarter.

Balance Sheet & Cash Flow

Booz Allen Hamilton exited the fiscal third quarter with cash and cash equivalents of $696.8 million compared with $781.5 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 $99.8 million of net cash from operating activities. Capital expenditure was $30.7 million and free cash flow was $69 million.

The company paid out dividend worth $38.1 million and repurchased shares worth $22.5 million in the reported quarter.

Fiscal 2020 Outlook

The company raised its revenue growth projection to 10-11.5% from 9-11% expected earlier. The adjusted EPS guidance has been raised to $3.05-$3.15 from $3-$3.1 guided earlier. The midpoint ($3.1) of the revised guided range is below the Zacks Consensus Estimate of $3.14.

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 $500-$550 million, compared with the previous expectation of $450-$500 million.

Zacks Rank and Other Stocks to Consider

Booz Allen Hamilton currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader Zacks Business Services sector are Waste Management (WM - Free Report) , S&P Global SPGI and Fidelity National Information Services FIS, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings (three to five years) growth rate for Waste Management, S&P Global and Fidelity National Information Services is estimated at 8.2%, 10% and 8.9%, respectively.

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