Booz Allen Hamilton (BAH, Financial) cheered the Street with its second-quarter results that came in line with the street expectations. Although revenue and earnings were marginally down year over year, this decline was anticipated on account of macroeconomic challenges even as government lowered its spending. As a result of its in line results the stock soared and is currently trading at its 52-week high. Starting with its numbers for the quarter let’s have a detailed analysis of this stock.
Its revenue for the quarter marginally declined to $1.3 billion from a year ago period of $1.37 billion but was in line with the street estimates. Earnings (adjusted) also declined to 44 cents a share compared to 47 cents last year but topped the consensus estimate of 41 cents per share.
What next?
Albeit the result seems to be dull on a year over year basis but the stock is soaring high. As anticipated the numbers during the quarter were affected by last year’s federal government shutdown. But the management says that its results have improved and are well on track to deliver margin improvement for the entire fiscal. And to keep the momentum up Booz is constantly investing in innovative capabilities such as predictive intelligence, engineering, systems development and advanced analytics.
And these investments in such growth prospects have positioned the company well for top line growth. Going forward, the company has planned to expand its capacity to serve its client better. This will be carried out through a combination of domain understanding, market leading consulting talent and broader technical capabilities. While investing, Booz will focus on differentiated platforms engineering, software development and various others.
A closer look at the clients
The company mainly focuses on clients that operate in three sectors namely financial services, healthcare and energy. However, because of its strong know-how in cyber it is drawing clients from manufacturing and retail as well. As a result of its strong technical expertise it has a portfolio of blue chip clients. In addition, the company made significant stride since it returned to commercial some three years back. In the area of cyber security Booz Allen has a holistic approach to clients and provides them with sustainable protection.
Apart from this, it is also working hand in hand with a pharmaceutical company. It uses big data techniques to help increase the production yield and availability of a critical medicine. This is a significant step ahead as analyzing this source was too costly and time-consuming. But Booz Allen’s cloud analytics architecture platform was a great help for companies encountering such problems. Explaining this, the management said, “This concept pioneered by our firm allows us to use the massive processing power of the cloud itself to analyze vast amounts of data from diverse sources at incredible speeds.”
Recently, Booz Allen acquired Epidemico, Inc, which is a small informatics company that provides insights, continuous monitoring and consumer engagement across many important aspects of population health, including disease outbreaks, drug safety and supply chain vulnerabilities. And the management is confident that in the long runs this new acquisition will play a vital role in its broad next gen analytic strategy.
Conclusion
Currently, it has a trailing P/E of 16.82 compared to the industry P/E of 27.29, which is quite good and its forward P/E looks even more impressive at 15.24 reflecting improvement in its earnings. The company reported strong numbers during the quarter and expects this momentum to continue in the days ahead. The company is expanding through new acquisitions, which will play a strategic role in its development in the days ahead. The stock had a strong run in the past year and considering its future prospects we could see more upside to this stock.
