Shares of Parsons (NYSE:PSN) fell as much as 11% on Wednesday after the provider of government services reported weaker than expected earnings and issued a tepid outlook for 2021. The pandemic is slowing business for many defense services companies, and Parsons is part of that trend.
Before markets opened, Parsons reported fourth-quarter earnings of $0.21 per share on revenue of $964.26 million, falling short of analyst expectations for $0.34 per share in earnings on sales of $1.04 billion. Revenue was down about 7% from a year prior.
The company said its results were hindered by the pandemic, which has slowed contract awards and development. The government business did generate better than expected margins, but that was offset by issues on the civil side, including an $11 million write down on a joint venture.
The company also said it expects to generate earnings before interest, taxes, depreciation, and amortization (EBITDA) in a range of $350 million to $375 million in 2021, and revenue of $3.85 billion to $4.05 billion, shy of the $391 million EBITDA on $4.23 billion in revenue consensus.
The news wasn't all bad. Parsons recorded a healthy 1.1 times book-to-bill in the quarter, a measure of new business coming in during the period compared to what was billed out.
CEO Chuck Harrington in a post-earnings statement was optimistic about Parsons' future.
We will continue to build and leverage our strong balance sheet and cash flow to drive growth and differentiation through investments in our people, technology, and M&A. We are excited about our outlook and believe our strategy and portfolio are closely aligned with the Biden administration's national defense, infrastructure, and environmental priorities. We look forward to providing a more detailed update on our strategy and outlook during our upcoming investor day.
I think the optimism is well-founded, but the question is how quickly we will get there. Defense contractors were already bracing for a slowdown in government spending in 2021 even before the COVID-related expenses began to add up, and disruptions to procurement could last well through the year.
For long-term holders, the quarter should be no reason for concern. Parsons is still on the right track, it just might take longer than some had hoped for its to get there.