Booz Allen Hamilton Holding Corp. (NYSE: BAH), a prominent defense consulting firm, reported its fiscal third-quarter financial results with adjusted earnings per share (EPS) significantly exceeding market expectations. The company posted adjusted EPS of $1.77 per share, topping the analyst consensus estimate of $1.29. This earnings performance reflected operational strengths in the period, although total revenue experienced a decline.
For the quarter, Booz Allen's reported revenue stood at $2.62 billion, marking a 10.2% drop from the same period last year. This figure also fell short of the consensus estimate of $2.75 billion, indicating some pressure in top-line growth. The company's revenue excluding billable expenses declined by 6.7%, suggesting reductions in service engagement or contract scope beyond pass-through billables.
A notable highlight was the increase in Booz Allen’s contract backlog, which grew by 1.5% to reach a record-setting $38 billion. This backlog growth underscores ongoing demand and contract wins within the defense sector. Despite the rising backlog, the quarterly book-to-bill ratio was reported at 0.3x, a metric that indicates new orders in the quarter compared to billed revenue.
Operating income for the quarter decreased to $230 million, down from $291 million year-over-year, reflecting margin pressures amid the revenue contraction. Furthermore, the client staff headcount declined by approximately 3,700 employees relative to the prior year, representing an 11.3% reduction in workforce. As of December 30, this headcount decrease could suggest shifting operational dynamics or efficiency measures.
On the balance sheet, Booz Allen held cash and cash equivalents totaling $882 million at the quarter's close, maintaining liquidity to support operations and strategic initiatives. Long-term debt, net of current portion, was reported at $3.86 billion, a level consistent with the company's financing structure and capital deployment strategy.
Dividend Update
Booz Allen announced a quarterly dividend payment of $0.59 per share, representing a 7% increase over the previous dividend level. The dividend is scheduled for distribution on March 2, 2026, to shareholders of record as of February 13, 2026. This increase reflects the company's commitment to returning capital to shareholders despite revenue and income variability.
Fiscal Year 2026 Outlook
In its updated guidance, Booz Allen now forecasts full-year fiscal 2026 revenue in the range of $11.3 billion to $11.4 billion, a slight downward adjustment from an earlier range of $11.3 billion to $11.5 billion. This revised revenue outlook sits marginally below the analyst consensus estimate of $11.403 billion.
Contrasting the revenue adjustment, the company raised its adjusted EPS outlook to a range of $5.95 to $6.15, improved from the prior guidance of $5.45 to $5.65. This revised EPS guidance also exceeds the consensus analyst estimate of $5.62, highlighting expected earnings resilience. The company maintains its projection for an adjusted EBITDA margin in the mid-10% range.
Regarding cash generation, Booz Allen’s forecasted free cash flow was narrowed to a range of $825 million to $900 million, a modest reduction from the earlier target of $850 million to $950 million. This reflects careful management of liquidity in light of operational performance.
Market Reaction
Following the earnings announcement, shares of Booz Allen Hamilton experienced a premarket increase of 5.58%, trading at $101.10. This positive price action reflects investor recognition of the company’s earnings beat, backlog strength, and dividend hike despite some revenue softness and workforce reductions.
Key Points
- Adjusted EPS of $1.77 in fiscal Q3 exceeded analyst expectations of $1.29 despite a revenue decline.
- Quarterly revenue fell 10.2% year-over-year to $2.62 billion, missing the $2.75 billion consensus.
- Backlog increased by 1.5% to an all-time high of $38 billion, indicating sustained contract demand.
- Workforce declined by 11.3%, with a reduction of approximately 3,700 client staff compared to the prior year.
Risks and Uncertainties
- Revenue contraction and a declining book-to-bill ratio may signal challenges in sustaining growth momentum.
- Reduction in headcount could impact operational capacity or indicate restructuring-related risks.
- Lower operating income year-over-year points to margin pressures which could affect profitability.
- Reduced free cash flow guidance suggests potential constraints on cash generation relative to prior expectations.
Disclosure
This report is based on publicly available financial information and does not constitute investment advice. Readers should consider their own investment objectives and consult financial professionals before making investment decisions.