Stifel has adjusted its price target for Booz Allen Hamilton (NYSE: NYSE:BAH), reducing it to $170 from the previous $175, while still endorsing the stock with a Buy rating.
The revision follows Booz Allen's reported adjusted earnings per share (EPS) of $1.38, which fell short of Stifel's $1.47 estimate and the $1.52 consensus. The lower-than-expected results were largely attributed to the adjusted EBITDA of $302 million, which did not meet the $328 million market consensus, said an analyst from Stifel.
Despite the shortfall in the first quarter adjusted EPS, Booz Allen's management has not altered its full-year guidance, maintaining its expectations for adjusted EBITDA between $1.26 and $1.30 billion and adjusted EPS in the range of $5.80 to $6.05.
According to historical patterns, the first quarter typically accounts for about 24-26% of the full-year adjusted EPS. This year's first quarter results place Booz Allen at approximately 23.3% of the way to the midpoint of the forecasted range.
Stifel noted that it would have been more concerned if the company's bookings had declined, but with robust bookings in the first quarter and promising prospects for the second quarter, combined with the potential for margin expansion, the firm does not foresee a significant risk of a guidance reduction after the second quarter.
The firm's analyst suggests that the earnings update may have a minimal effect on their own estimates but could lead to a downward adjustment in the consensus, potentially creating short-term market pressures.
Stifel concluded by suggesting that any sell-off resulting from these consensus adjustments could be a buying opportunity, given the positive demand signals for Booz Allen.
To be sure, Booz Allen Hamilton has been making strategic moves to improve its technology offerings and enhance global security. The company recently invested in Quindar, a space tech firm, and acquired PAR Government Systems Corporation, both aligning with its VoLT business strategy.
Additionally, Booz Allen Hamilton has appointed William Vass, former Vice President of Engineering at Amazon (NASDAQ:AMZN) Web Services, as its new Chief Technology Officer, further accelerating its focus on artificial intelligence and cybersecurity.
InvestingPro Insights
Booz Allen Hamilton's (NYSE:BAH) commitment to shareholder returns is evident as the company has raised its dividend for 8 consecutive years and maintained payments for 13 consecutive years. With a market capitalization of $17.92 billion and a dividend yield of 1.33%, the firm's dedication to consistent dividends aligns with its stable financial standing, where liquid assets surpass short-term obligations. Additionally, Booz Allen's revenue growth is notable, with a 15.15% increase over the last twelve months as of Q4 2024, which may reassure investors about the company's ability to maintain its full-year guidance despite the first-quarter earnings miss.
Investors seeking value might find Booz Allen attractive as it trades at a low P/E ratio relative to near-term earnings growth, with a P/E ratio of 29.73 and a PEG ratio of 0.26 as of Q4 2024. This suggests that the company's earnings growth could be undervalued by the market, presenting a potential opportunity for value investors. Furthermore, the firm is trading at a price that is 84.15% of its 52-week high, indicating room for potential price appreciation.
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