Parsons(NYSE: PSN) has been one of the best under-the-radar stocks in the defense sector over the past five years, outpacing the S&P 500.
The company kept that momentum going in the most recent quarter, easily topping expectations. Investors are rallying into the shares, sending Parsons stock up 15% as of noon ET.
A beat and raise from a cyber specialist
Parsons provides tech-based solutions and consulting for the defense, intelligence, and critical infrastructure markets. The company has been publicly traded since 2019, and has been a highflier during its time since that initial public offering (IPO).
Parsons earned $0.84 per share in the second quarter on revenue of $1.7 billion, topping Wall Street's consensus estimate for $0.69 per share in earnings on sales of $1.5 billion. Revenue was up 23% year over year, and free cash flow of $152 million came in ahead of expectations.
"We achieved over 20% organic growth for the fifth consecutive quarter and double-digit growth across all business units and geographies," CEO Carey Smith said in a statement. "We are excited about our future as we are well-positioned to take advantage of the tailwinds that are positively impacting both of our segments and six end-markets."
Parsons also raised its full-year revenue view to $6.35 billion to $6.55 billion, up from previous guidance for $6.1 billion to $6.4 billion.
Is Parsons stock a buy?
Parsons is in the right business at the right time, focused on areas including cyber operations and electronic warfare that are top priorities for the Pentagon. Some of Parsons' most important government contracts are just beginning to ramp up, setting the stage for predictable growth from here.
The company's book-to-bill ratio, a measure of how much new business came in during the quarter, was a lackluster 0.76, but Parsons also announced a $200 million deal for cyber specialist BlackSignal that should add to its expertise and position it well to win additional business in quarters to come.
Parsons is set up well to continue winning from here.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
