What happened?
Shares of government consulting firm Booz Allen Hamilton (NYSE: BAH) jumped 7.8% in the afternoon session after it rebounded from the previous session as the company reported fiscal second-quarter results with adjusted earnings above analyst estimates and raised its full-year earnings outlook. According to the company’s press release, Booz Allen posted adjusted earnings of $1.76 a share for the quarter ended Sept. 30, up 18% from a year earlier and above the $1.48 consensus. Revenue was $2.78 billion, down 3.9% and just short of the $2.81 billion estimate. Revenue excluding billable expenses was nearly flat, down 0.8% to $1.96 billion. Adjusted EBITDA was $313 million and the margin widened 10 basis points to 11.3%.
On the call, management said the earnings increase came from profit growth, a lower share count, a lower tax rate, and a $10 million earn-out on the DARPA divestiture. Demand held up. The quarterly book-to-bill ratio was 1.5 times, helped by a large classified award, and total backlog rose 1.9% to $41 billion. Funded backlog rose 5% to $5.7 billion. For fiscal 2027, revenue is now expected at $11.3 billion to $11.6 billion, growth of 1% to 3%, a narrower range than the prior $11.2 billion to $11.7 billion. National security is expected to accelerate in the second half and grow at a mid-single-digit rate for the year.
Civil is the soft spot: revenue there is expected to be flat to slightly down in each of the next two quarters and down by a low-double-digit rate for the year, a bit weaker than the initial view. The range now includes Ultra Mission Solutions, which management said carries margins above 20% and offset the civil weakness. Adjusted EBITDA was raised at the low end, to $1.26 billion to $1.29 billion, with a second-half margin step-down from seasonality and investment spending. Adjusted earnings guidance was raised to $6.50 to $6.70 a share from $6.00 to $6.35, above the $6.34 FactSet consensus. That figure includes the first-quarter CVC gain, the DARPA earn-out, and a lower expected tax rate. Free cash flow is now $850 million to $925 million, up from a prior floor of $825 million.
The board also declared the regular quarterly dividend of 59 cents a share, payable Dec. 4 to holders of record Nov. 12, and the finance chief said the company will keep paying the dividend and making modest repurchases while it deleverages through the Ultra integration.
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What is the market telling us
Booz Allen Hamilton’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 18 days ago when the stock gained 5.3% on the news that Truist Securities analyst Tobey Sommer upgraded the stock from Hold to Buy. According to Streetinsider, Sommer raised the price target to $85 from $70. He said the drop in civil revenue is nearing a bottom and that strength in national security is still underappreciated. Democratic control of Congress, he said, could lower the risk of further cuts to civil spending. He also sees room for wider margins as the company shifts toward fixed-price contracts, with about 70 basis points of expansion by fiscal 2029 against the 30 basis points built into consensus, and he lifted his fiscal 2028 estimates slightly.
Booz Allen Hamilton is flat since the beginning of the year, and at $84.02 per share, it is trading 17.8% below its 52-week high of $102.23 from January 2026. Investors who bought $1,000 worth of Booz Allen Hamilton’s shares 5 years ago would now be looking at an investment worth $1,017.
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