Why Is Booz Allen (BAH) Up 5.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Booz Allen Hamilton (BAH). Shares have added about 5.8% in that time frame, outperforming the S&P 500.

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 the most recent earnings report in order to get a better handle on the important drivers.

Booz Allen Beats on Earnings and Revenues in Q1

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

Adjusted EPS of 83 cents beat the consensus mark by 11 cents and improved 15.3% on a year-over-year basis. The bottom line benefited from top-line growth, strong contract level performance and operational management.

Revenues, Backlog & Headcount Grew Y/Y

Total revenues of $1.83 billion surpassed the Zacks Consensus Estimate by roughly $41 million and increased 10.8% year over year. The top line benefited from continued boost in client demand and increase in headcount.

Revenues excluding billable expenses were $1.27 billion, up 8.9% on a year-over-year basis. Billable expenses accounted for 30.2% of revenues. Booz Allen earns the maximum amount of profit from revenues, excluding billable expenses.

Total backlog increased 16.2% from the prior-year quarter to $19.85 billion. Funded backlog of $3.20 billion improved 13.7%. Unfunded backlog was up 5.1% to $4.35 billion. Priced options went up 21.5% to $12.31 billion. Book-to-bill ratio was 1.29, down 21.3% year over year. Headcount of 26,384 increased 7.4% year over year.

Operating Performance Improved

Adjusted EBITDA of $199.07 million increased 12% year over year. Adjusted EBITDA margin on revenues increased to 10.9% from 10.8% in the year-ago quarter. Adjusted EBITDA margin on revenues, excluding billable expenses increased to 15.6% from 15.2% in the year-ago quarter.

Adjusted operating income was $179 million, up 10.8% year over year. Adjusted operating income margin on revenues was 9.8%, flat with the year-ago quarter figure. Adjusted operating income margin on revenues, excluding billable expenses was 14.1% compared with 13.8% in the year-ago quarter.

Balance Sheet & Cash Flow

Booz Allen exited the fiscal first quarter with cash and cash equivalents of $649.10 million compared with $284 million at the end of the prior quarter. Long-term debt (net of current portion) was $2.06 billion, compared with $1.70 billion in the previous quarter. The company generated $50.98 million of net cash from operating activities. Capital expenditure was $27.34 million and free cash flow was $23.65 million.

It paid dividends worth $32.41 million and repurchased shares worth $12.18 million in the reported quarter.

Fiscal 2020 Outlook

The companyexpects adjusted EPS to range between $2.90 and $3.05.Itexpects revenue growth of 6-9%. Adjusted EBITDA margin on revenues is anticipated in the low 10% range.It targets another 5% headcount growth for the fiscal year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

Currently, Booz Allen has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 this revision looks promising. 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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