Shares of government technology consultancy Booz Allen Hamilton (BAH 0.98%) fell on Wednesday, down as much as 4.9% before recovering modestly to a 4% decline as of 1:37 p.m. ET.
Booz Allen sold off by a double-digit number last Friday following its fiscal-fourth-quarter earnings release, before recovering a bit yesterday. But today, sell-side analysts downgraded their ratings and price targets, and these delayed negative takes from last week's earnings appear to be sending shares down again today.
Goldman Sachs downgrades to sell
Today, analysts at Goldman Sachs downgraded Booz Allen Hamilton shares from neutral to sell, while lowering the firm's price target on shares from $108 to $94. As of this writing, Booz Allen's stock price is $104.75.
The Goldman analysts downgraded shares because they now see medium-term earnings growth as "flat," given the new outlook from management on last Friday's conference call with analysts. On that call, management noted that it sees revenue growth between 0% and 4% in fiscal 2026 (ending in March 2026), down from 12.4% last year, with an adjusted (non-GAAP) earnings range of $6.20 to $6.55. That compares with $6.35 earnings last year.
If by "the medium term" Goldman means the one-year outlook, it's right on that front. And if that remains the growth rate for Booz Allen going forward, then yes, the current multiple of around 16.5 could be correct, or even a little high.
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But there's a high likelihood growth resumes after this year
Goldman seems a bit short-term-oriented and pessimistic here, assuming this year's DOGE cuts are a one-time reset. Booz Allen projected a low double-digit decline in its civil business this year, which makes up 35% of its revenue. But that means its defense and intelligence businesses, which make up 65% of revenue, are still likely to grow in the double digits, in order for the whole company to reach management's 2% overall growth projection. Of note, Booz Allen has grown at an 11.7% organic rate over the past three years.
But if the civil business stabilizes after this year, it seems like Booz Allen should continue to resume its prior growth rate in 2027. That means its P/E multiple could go back to the low-20s, which has been about its average over the past decade.
Thus, long-term-oriented investors may wish to look at Booz Allen shares on this recent weakness.
