BofA Downgrades Parsons On Execution Uncertainties

Parsons Corp’s PSN disappointing second-quarter results and unexpected guidance reduction raise concerns around the execution of the company’s margin and M&A integration strategies, according to BofA Securities.

The Parsons Analyst: Ronald Epstein downgraded the rating for Parsons from Neutral to Underperform, while reducing the price target from $45 to $35.

The Parsons Thesis: The company was surprisingly unable to “correctly anticipate industry-wide headwinds, including a challenging hiring environment and funding delays,” Epstein said in the downgrade note.

Although Parsons is “well-positioned to benefit from the Biden administration’s priorities at both Federal Solutions (FS) and Critical Infrastructure (CI),” it is unclear if its focus on higher-margin contracts at CI “could leave some revenues on the table,” the analyst noted.

“At FS, integrating and realizing synergies from multiple acquisitions could prove more challenging than expected,” he added.

“Until we see a clear execution strategy towards these topics, we see PSN as a relative underperformer in our coverage universe,” Epstein wrote.

PSN Price Action: Shares of Parsons had declined by 0.34% to $35.48 at the time of publication Thursday.

Image by mohamed Hassan from Pixabay.