Government contractor Booz Allen Hamilton (NYSE: BAH) missed Wall Street's profit expectations for the quarter and set full-year profit guidance that underwhelmed expectations. Investors are looking elsewhere, sending Booz shares down 10% as of 12:30 p.m. ET.

Costs creep higher

Booz Allen Hamilton provides information technology and consulting services for civilian and military government customers. The company has outperformed the market over the past five years, and investors had big hopes coming into earnings season.

But Booz failed to deliver. The company earned $1.38 per share in its fiscal first quarter ended June 30, well short of the $1.52 per share Wall Street had expected. Revenue, at $2.94 billion, came in close to expectations.

The issue was costs. Headcount grew 7.7% year over year, but management said during the earnings call there was a gap between when the new hires came on and when they became billable under new contracts.

For the full fiscal year, Booz Allen sees earnings coming in at between $5.80 and $6.05 per share. That suggests some potential downside compared to Wall Street's $6.05-per-share expectation.

Is Booz Allen Hamilton a buy?

There is a lot to like in this report. Headcount tends to be a good indicator of future revenue, and Booz Allen said it booked $1.80 of new business in the quarter for every $1 it billed out. Overall, the company expects revenue to grow between 8% and 11% in its new fiscal year.

But the expenses are something to watch and the full-year guidance is not nearly as impressive as the numbers that Wall Street had hoped for.

Booz Allen Hamilton is a solid operator with strong connections inside some of the most important areas of the U.S. government and is set up well to be a long-term winner. But investors need to be on the lookout for further volatility until the market has more clarity about how fiscal 2025 is playing out.

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Lou Whiteman has positions in Booz Allen Hamilton. The Motley Fool recommends Booz Allen Hamilton. The Motley Fool has a disclosure policy.

Why Booz Allen Hamilton Stock Is Sinking Today was originally published by The Motley Fool