Virginia-based management and technology consulting services
Booz Allen Hamilton Holding Corp.
) shares slumped 2.6% after news one of its employees revealed
classified information related to a National Security Agency
(NSA) electronic surveillance program (called PRISM).
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The 29-year-old Edward Snowden responsible for the leak was once
associated with the U.S. Central Intelligence Agency (CIA). He
broke the story to the U.K-based daily
and admitted that some secret information regarding the NSA's
PRISM program had been given out as a news byte to a section of
the media. (Snowden has previously spent four years working with
several contractors of the NSA.)
The NSA, one of the secret agencies of the U.S. Department of
Defense, is responsible for the collection and analysis of
foreign communications and foreign signals intelligence, as well
as protecting the U.S. government's communications and
Booz Allen, which has been Snowden's employer for just about
three months, may be significantly impacted by the outcome of the
probe. Being one of the biggest contenders for government
contracts (roughly 99.0% of its revenues), it could be hard for
Booz Allen to escape responsibility for inadequate safety
Booz Allen's close association with the federal agencies is
mainly due to its mission critical services that are helpful for
combating global terrorism, improving cyber capabilities,
transforming the healthcare system, improving efficiency and
managing change within the government, and protecting the
Booz Allen reported a solid fourth quarter 2013 with earnings of
39 cents topping the Zacks Consensus Estimate by 11.4%. Though
year-over-year revenue growth was negligible, Booz Allen recorded
a total backlog of $11.83 billion.
We think that the Snowden issue and tight spending by federal
agencies can jeopardize its position. If this issue is resolved,
however, the solid backlog, deal pipeline, planned acquisitions
and strategic investments in core business areas could result in
a good year for the company.
Currently, Booz Allen has a Zacks Rank #2 (Buy). Some other
stocks in the category that warrant a look, include
Providence Service Corp.
), carrying a Zacks Rank #1 (Strong Buy), and
), carrying a Zacks Rank #2 (Buy).