Booz Allen (BAH) Beats Q4 Earnings and Revenue Estimates

Booz Allen Hamilton Holding Corporation BAH reported strong fourth-quarter fiscal 2019 results, beating the Zacks Consensus Estimate on both earnings and revenues.

Adjusted EPS of 64 cents beat the consensus mark by 2 cents and improved on a year-over-year basis. The bottom line benefited from top-line growth, strong contract level performance and operational management.

Total revenues of $1.8 billion surpassed the Zacks Consensus Estimate by roughly $73 million and increased year over year. The top line benefited from continued boost in client demand and increase in headcount.

Revenues excluding billable expenses were $1.2 billion, up 8.1% on a year-over-year basis. Billable expenses accounted for 30.3% of revenues. Booz Allen earns the maximum amount of profit from revenues, excluding billable expenses.

Booz Allen Hamilton Holding Corporation Price and Consensus

Booz Allen Hamilton Holding Corporation Price and Consensus

Booz Allen Hamilton Holding Corporation price-consensus-chart | Booz Allen Hamilton Holding Corporation Quote

Total backlog increased 20.6% from the prior-year quarter to $19.3 billion. While funded backlog of $3.4 billion improved 28%, unfunded backlog was down 11.4% to $3.7 billion. Priced options went up 33% to $12.2 billion. Book-to-bill ratio was 0.36, down 40% year over year.

Headcount of 26,069 increased 5.8% year over year. Strong hiring and retention during the quarter enabled the company to surpass its headcount growth target of 5% for the fiscal year.

Booz Allen updated its three-year adjusted EPS goal. For the period from fiscal 2018 through fiscal 2021, the company now targets adjusted EPS growth of 66% compared with the previous target of 50%. It expects dividend yield of approximately 2%, supported by 6%-9% annual revenue growth, low 10% range adjusted EBITDA margin and $1.4 billion in capital deployment.

Shares of Booz Allen have gained a massive 38.4% year to date, significantly outperforming 25.7% growth of the industry it belongs to.

Operating Results

Adjusted EBITDA of $153.3 million increased 3.4% year over year. Adjusted EBITDA margin on revenues declined to 8.6% from 9.1% in the year-ago quarter. Adjusted EBITDA margin on revenues, excluding billable expenses declined to 12.4% from 12.9% in the year-ago quarter.

Adjusted operating income was $135.1 million, up 2.6% year over year. Adjusted operating income margin on revenues was 7.6% compared with 8.1% in the year-ago quarter. Adjusted operating income margin on revenues, excluding billable expenses was 10.9% compared with 11.5% in the year-ago quarter.

Balance Sheet & Cash Flow

Booz Allen exited the fiscal fourth quarter with cash and cash equivalents of $284 million compared with $211.9 million at the end of the prior quarter. Long-term debt (net of current portion) was $1.7 billion, roughly flat with the previous quarter figure.

The company generated $216.4 million of net cash from operating activities. Capital expenditure was $36.6 million and free cash flow was $179.8 million.

The company declared quarterly dividend of 23 cents per share, payable on Jun 28, 2019, to stockholders of record on Jun 14, 2019. It paid dividends worth $32.4 million and repurchased shares worth $71.4 million in the reported quarter.

Fiscal 2020 Outlook

Management expects adjusted EPS to range between $2.90 and $3.05, the mid-point of which ($2.98) is slightly above the Zacks Consensus Estimate of $2.96 for the period.

The company expects revenue growth of 6-9%. Adjusted EBITDA margin on revenues is anticipated in the low 10% range.

The company targets another 5% headcount growth for the fiscal year as labor market stays tight.

Zacks Rank & Other Key Picks

Booz Allen currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the broader Zacks Business Services sector are Navigant Consulting NCI, WEX WEX and FLEETCOR Technologies FLT. While Navigant Consulting sports a Zacks Rank #1, WEX and FLEETCOR carry a Zacks Rank #2.

Long-term expected EPS (three to five years) growth rate for Navigant Consulting, WEX and FLEETCOR is 13.5%, 15% and 16.5%, respectively.

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