Riding High On AI Revenues: Analyst Sees Booz Allen Hamilton Exceeding FY24 And FY25 Estimates

Truist Securities analyst Tobey Sommer reiterated a Hold rating on Booz Allen Hamilton Holding Corporation BAH, raising the price target to $120 from $106.

The company reported first-quarter revenue growth of 18% year-on-year to $2.65 billion, beating the consensus of $2.51 billion. Booz Allen Hamilton reiterated FY24 Outlook. It sees sales growth to 7% - 11% or ($9.907 billion - $10.277 billion).

Also Read: Booz Allen Hamilton Stock Soars After Q1 Beat. Here's How It Performed

Management opted to reaffirm guidance, which now looks highly conservative following 1Q outperformance, notes the analyst, citing that BAH is running ahead of plan relative to FY25 financial targets.

Sommer believes BAH is viewed as a relative AI leader in the Government Services space. Management has long touted AI as a relative strength for the company, notes the analyst. 

Sommer estimates AI revenues of ~$400 million today, growing at a ~20% CAGR over the past five years. 

The analyst thinks investor optimism around the AI business partially accounts for BAH's expanding premium relative to the group in recent months.

BAH booked $2.7 billion in awards during the quarter, translating to a 1.0x quarterly book-to-bill (vs. the 1.4x prior three-year average) and 1.2x on a TTM basis.

Based on the above, the analyst increased the FY24 revenue estimate to $10.187 billion (prior: $10.089 billion) and adj. EPS to $4.92 (prior: $4.86). For FY25E, Sommer increased revenue estimate to $10.798 billion (prior: $10.623 billion) and adj. EPS to $5.45 (prior: $5.37).

The analyst's $120 price target assumes a 15.5x EV/EBITDA multiple on the FY24 estimates.

Price Action: BAH shares are trading lower by 0.41% to $120.45 on the last check Monday.