Defense IT company Booz Allen Hamilton (NYSE: BAH) delivered quarterly earnings that substantially beat expectations and forecast a better-than-expected 2024. Investors are rallying into the shares, sending Booz Allen stock up 13% as of 11 a.m. ET Friday.
A solid beat and a dividend boost
Booz Allen Hamilton is one of the so-called "Beltway Bandit" defense contractors, companies that are focused on providing technology services, and not armaments, to the Pentagon and other government agencies.
The company ended 2023 on a high note, reporting fiscal third-quarter adjusted earnings of $1.41 per share on revenue of $2.57 billion. Earnings and revenue were up 32% and 12.8% year over year, respectively, and the per-share number easily surpassed the $1.14 Wall Street had expected.
"Strong demand and growing headcount are fueling continued momentum as we scale and evolve Booz Allen's technology positions and invest in our people," CEO Horacio Rozanski said in a statement. "We are creating exceptional value for clients and investors as we deliver ahead of pace on our investment thesis."
The company believes that momentum will continue. Booz Allen raised its quarterly dividend by 8% to $0.51 per share and raised its full-year fiscal 2024 guidance to $5.25 to $5.40 per share, from $4.95 to $5.10. The company also said it expects full-year net cash from operations to come in at between $200 million and $275 million, up from previous guidance for $160 million to $260 million.
The guidance hike was in part expected since Booz Allen's previous forecast had conservatively factored in the potential for a government shutdown. But even with that in mind, the results were strong: Book-to-bill, a comparison of current-quarter business to the new business that came in during the period, stood at 1.42 over the past 12 months.
Is Booz Allen Hamilton a buy after its strong earnings report?
The strong results stand in contrast to the more pedestrian results from larger, better-known contractors like Northrop Grumman and Lockheed Martin. That is in part due to company-specific issues, but it is also a reflection of where we are in the defense product cycle and the government's focus on bulking up its technology.
Booz Allen Hamilton has historically been one of the top vendors to the intelligence community, an area that tends to get investment through good times and bad. Friday's results are a validation to those who have been expecting big things from Booz Allen Hamilton and its peers for some time now, but for long-term investors, there is still a lot of growth potential.
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Lou Whiteman has positions in Booz Allen Hamilton and Lockheed Martin. The Motley Fool recommends Booz Allen Hamilton and Lockheed Martin. The Motley Fool has a disclosure policy.
