Unlock stock picks and a broker-level newsfeed that powers Wall Street.
The Struggle Is Real For Booz Allen Hamilton
  • Booz Allen Hamilton Holding Corporation (NYSE: BAH)'s stock has increased by almost 20 percent over the past year.

  • Morgan Stanley’s Denny Galindo has downgraded the company to Underweight, while lowering the price target to $23.

  • The outperformance makes the stock appear too expensive in an industry that is becoming increasingly competitive, along with uncertainties regarding the 2016 budget

According to the Morgan Stanley report, “Troop drawdowns and stagnant budgets are leading defense firms to pursue the same growing portions of the budget thereby increasing competitive pressures throughout the industry.”

The upcoming spin-offs are also likely to add to the competition for sales, making margin expansion for Booz Allen more difficult, especially given that the company has delivered annual margin expansion of 55 bps since 2010.


Investors had expected signs of a growing budget for FY16 by now. However, with no such indications, there could be unexpected added competitive pressures. On the other hand, the Street has forecasted 6 percent EPS growth through 2018, despite flat EPS growth since 2012. Galindo expects the company to be able to post EPS improvement of about 2 percent through 2018.

With EPS expected to disappoint going forward, the EPS estimates for FY16 and FY17 have been lowered.

Latest Ratings for BAH

Sep 2015

Morgan Stanley

Downgrades

Equal-weight

Underweight

Jul 2015

BB&T Capital

Initiates Coverage on

Buy

May 2015

Citigroup

Maintains

Neutral

View More Analyst Ratings for BAH
View the Latest Analyst Ratings

See more from Benzinga

© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.


Waiting for permission
Allow microphone access to enable voice search

Try again.