Booz Allen Hamilton (BAH +1.40%), the defense contractor no one had ever heard of before its employee Edward Snowden leaked government secrets back in 2013, reported a powerful earnings beat this morning, sending its shares soaring 9.2% through 11:30 a.m. ET.
Analysts forecast Booz would earn $1.27 per share, adjusted for one-time items, on sales of $2.7 billion in fiscal Q3 2026. Booz missed the sales forecast, reporting revenue of only $2.6 billion, but crushed on earnings, reporting $1.77 per share.
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Booz Allen Q3 earnings
Booz Allen's Q3 2026 sales declined 10% -- four of which Booz attributed to sales delayed by last year's government shutdown. That's not worrisome as those revenues were presumably only postponed by the shutdown, not lost.
More concerning is that Booz's book-to-bill ratio for the quarter was an anemic 0.3. That suggests near-term revenue growth will be weak -- and sales might even keep falling. (Trailing-12-month book-to-bill, on the other hand, is a respectable 1.1 ratio, suggesting Q3's weak results were more of a blip than a trend.)
Profits news was more clearly good. Margins are up, and earnings grew 7% in Q3. Even better, free cash flow eclipsed reported net profit, coming in at $248 million -- up 85%.
NYSE: BAH
Key Data Points
Is Booz Allen stock a buy?
On guidance, Booz lowered its revenue and free cash flow forecasts. Still, management anticipates generating FCF between $825 million and $900 million by year-end. At the high end, that values Booz stock at about 14 times free cash flow; at the low end, just a bit more than 15x.
It's a decent price, not a great price, for a steady government contracting business with a 2.3% dividend yield. Good enough for a "hold" rating, I think, if perhaps not a "buy."
