Government IT specialist Booz Allen Hamilton (NYSE: BAH) just topped quarterly expectations and sees the potential for more upside from here. Investors are buying in, sending shares up as much as 7% on Friday. As of 12:45 p.m. ET, the stock was up 4%.
Strong results and a bright future
Booz Allen provides a range of technological services to government and private sector customers, with a heavy emphasis on the defense and intelligence markets.
Booz Allen earned $1.33 per share in its fiscal fourth quarter ended March 31 on revenue of $2.77 billion, surpassing Wall Street's consensus estimates for $1.23 per share in earnings on sales of $2.72 billion. Net income was up 287% and revenue jumped nearly 14% year over year, fueled by contract wins in the federal defense and civil markets.
Booz Allen also grew its head count by 7.4% over the past year, a positive sign for the company. Consulting operations like Booz Allen tend to hire based on future contracted business. Gross margin in the quarter was 54.7%.
The company expects to generate between $825 million and $925 million in net cash from operations in its new fiscal year, with earnings between $5.80 and $6.05 per share. Wall Street was expecting the midpoints of those ranges.
Is Booz Allen Hamilton stock a buy?
Rival Palantir gets a lot of the headlines, but Booz Allen Hamilton is a powerful force in the world of defense IT. The company generated about $600 million in sales from artificial intelligence (AI)-related work, and it expects that number to grow in the years to come.
PLTR BAH comparisons data by YCharts
No two government contractors are exactly alike, and comparisons can only go so far. But Booz Allen today trades at 1.8 times future sales and 26 times expected earnings, a significant discount to Palantir's 17 times future sales and 63 times expected earnings.
For those interested in the sector but worried about valuation, Booz Allen Hamilton deserves a closer look.
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Lou Whiteman has positions in Booz Allen Hamilton. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Booz Allen Hamilton. The Motley Fool has a disclosure policy.
