Bull of the Day: Booz Allen Hamilton (BAH)
Booz Allen Hamilton BAH, a Zacks Rank #1 (Strong Buy), provides management and technology consulting services to governments, corporations, and not-for-profit organizations in the United States and internationally. The company’s differentiated business model has led to increases in client acquisitions and future revenue opportunities. As we’ll see, BAH stock is displaying relative strength, recently surging to all-time highs. Increasing volume has attracted investor attention as buying pressure accumulates in this market leader.
BAH is part of the Zacks Government Services industry group, which currently ranks in the top 6% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform the market over the next 3 to 6 months, just as it has over the last year:
Image Source: Zacks Investment Research
Quantitative research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Booz Allen Hamiltonoffers analytics, engineering, mission operations, and cyber services to a diversified client base. The company provides transformational solutions in the areas of artificial intelligence, machine learning, and predictive modeling.
In addition, Booz Allen Hamilton focuses on quantum computing and computer network-related operations in the areas of data science, engineering, visualization, and analysis-centric capabilities. It is also engaged in user interface development along with graphic and web design.
The company has commercial clients across various industries including aerospace, health and life sciences, energy, financial services, and transportation. Booz Allen boasts a large addressable market; the government is one of the world’s largest consumers of technology and management consulting services. Furthermore, the agencies of the U.S. intelligence community offer an additional market.
Earnings Trends and Future Estimates
The consulting provider has strung together an impressive earnings history, surpassing earnings estimates in each of the past four quarters. Less than two weeks ago, the company reported fiscal third-quarter earnings of $1.41/share, a 24.8% surprise over the $1.13/share consensus estimate. Booz Allen Hamilton has delivered a trailing four-quarter average earnings surprise of 12.7%.
The growth outlook is expected to continue this year as we can see below:
Image Source: Zacks Investment Research
Looking ahead to fiscal Q4, BAH shares received a boost as analysts covering the company have been increasing their earnings estimates lately. Fourth-quarter earnings estimates have risen 3.51% in the past 60 days. The Zacks Consensus EPS Estimate now stands at $1.18/share, reflecting a potential growth rate of 16.8% relative to the year-ago period. Revenues are projected to climb 9.14% to $2.66 billion.
Image Source: Zacks Investment Research
Let’s Get Technical
BAH stock has advanced nearly 50% in the past year alone. Only stocks that are in extremely powerful uptrends are able to experience this type of outperformance. This is the kind of stock we want to include in our portfolio – one that is trending well and receiving positive earnings estimate revisions.
Image Source: StockCharts
Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping up. The stock has been making a series of 52-week (and all-time) highs, widely outperforming the major indices. With positive fundamental and technical indicators, BAH stock is poised to continue its outperformance.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, Booz Allen Hamilton has recently witnessed positive revisions. As long as this trend remains intact (and BAH continues to deliver earnings beats), the stock will likely continue its bullish run this year.
Bottom Line
Booz Allen Hamilton is ranked favorably by our Zacks Momentum Style Score, with a best-in-class ‘A’ rating in this category. This indicates that BAH stock is likely to move higher based on a powerful combination of earnings and price momentum. In addition to the favorable growth metrics, Booz Allen Hamilton also pays a $1.88 (1.32%) dividend.
Backed by a top industry group and impressive history of earnings beats, it’s not difficult to see why this company is a compelling investment. Robust fundamentals combined with an appealing technical trend certainly warrant a closer look. The future looks bright for this highly-ranked, leading stock.
Disclosure: BAH is a current holding in the Zacks Income Investor portfolio.
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Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report
