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Category: Stock Market and Parsons Corporation
Date: 13 November 2019 Stock Price: $37.80 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of Parsons Corporation a provider of technology solutions in defence and intelligence industry
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About Parsons Corporation
We are a leading provider of technology-driven solutions in the defense, intelligence and critical infrastructure markets. We provide technical design and engineering services and software to address our customers’ challenges. We have developed significant expertise and differentiated capabilities in key areas of cybersecurity, intelligence, defense, military training, connected communities, physical infrastructure and mobility solutions. By combining our talented team of professionals and advanced technology, we help solve complex technical challenges to enable a safer, smarter and more interconnected world.
The image below shows Parsons Corporations growth strategy.
The image below shows Parsons Corporations growth strategy.
Overview of Parsons' 3rd quarter 2019 earnings report
The numbers we are interested in (for the quarter):
- Revenues: $976.157 million (down from $1.023 billion from the same quarter of the previous year)
- Revenues decreased by -4.5% over the last 12 months
- Cost of contracts: $783.018 million (down from $798.552 million for the same quarter of the previous year)
- Cost of contract decreased by -1.9% over the last 12 months
- Net income: $41.222 million (down from $56.81 million for the same quarter of the previous year)
- Diluted earnings per share: $0.52 (down from $0.57 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 79.185 million (down from 99.43 million for the same quarter of the previous year)
- Cash and cash equivalents: $133.870 million
- Cash and cash equivalents per share: $1.69
- Cash and cash equivalents makes up 4.3% of Parson Corporation's market capital
- Cash and cash equivalents makes up 3.98% of Parsons Corporation's total assets
- Accounts receivable: $673.764 million
- Accounts receivable makes up 20.4% of Parsons Corporation's total assets
- Goodwill of Parsons: $1.050 billion
- Goodwill per share: $13.26
- Goodwill makes up 31.2% of Parson's total assets
- Goodwill per share: $13.26
- Cash generated from operations (for 9 months) : $99.822 million
- Cash generated from operations per share (for 9 months): $1.26
Parsons Corp's management commentary on their 3rd quarter 2019 earnings and guidance
CENTREVILLE, Va., Nov. 12, 2019 /PRNewswire/ -- Parsons Corporation (NYSE: PSN) today announced financial results for the third quarter ended September 30, 2019.
CEO Commentary
"We reported solid third quarter results with record revenue and adjusted EBITDA and strong cash flow," said Chuck Harrington, Chairman and CEO of Parsons Corporation. "We are established in growing and enduring markets, and we continue to win large strategic contracts, including our largest single-award cyber program to date. Our year-to-date margin expansion is driven by selling more technology-led solutions, shaping our portfolio, acquiring higher margin businesses and solid execution. "
Third Quarter 2019 Results
Total revenue for the third quarter of 2019 increased $47 million to over $1 billion, a new company record. Operating income decreased $2 million in the third quarter of 2019 primarily due to an additional $15 million of increased acquisition-related intangible amortization expenses and transaction-related costs. Diluted earnings per share (EPS) attributable to Parsons increased 10% to $0.57 primarily due to the positive impact from elections made in connection with the filing of the Company's 2018 S-Corporation tax return during the third quarter, offset by the increased acquisition-related intangible amortization and transaction-related expenses noted above and additional shares issued in the Company's IPO.
CEO Commentary
"We reported solid third quarter results with record revenue and adjusted EBITDA and strong cash flow," said Chuck Harrington, Chairman and CEO of Parsons Corporation. "We are established in growing and enduring markets, and we continue to win large strategic contracts, including our largest single-award cyber program to date. Our year-to-date margin expansion is driven by selling more technology-led solutions, shaping our portfolio, acquiring higher margin businesses and solid execution. "
Third Quarter 2019 Results
Total revenue for the third quarter of 2019 increased $47 million to over $1 billion, a new company record. Operating income decreased $2 million in the third quarter of 2019 primarily due to an additional $15 million of increased acquisition-related intangible amortization expenses and transaction-related costs. Diluted earnings per share (EPS) attributable to Parsons increased 10% to $0.57 primarily due to the positive impact from elections made in connection with the filing of the Company's 2018 S-Corporation tax return during the third quarter, offset by the increased acquisition-related intangible amortization and transaction-related expenses noted above and additional shares issued in the Company's IPO.
Recent Developments
Parsons continues to win large strategic contracts in growing and enduring markets. During the third quarter, the Company won six contracts over $100 million, including three single-award contracts and its largest ever cyber contract, and prime positions on three multiple-award IDIQ vehicles. Parsons also joined Northrop Grumman's Ground Based Strategic Deterrent (GBSD) team. The Company's strong customer relationships, rigorous capture processes, and investments in technology and people are driving success in winning new contracts and expanding existing contracts.
- Announced Carey Smith's role and responsibilities expanded from Chief Operating Officer to President and Chief Operating Officer. This promotion was made in recognition of her success in leading the operations of Parsons' Federal Solutions and Critical Infrastructure business segments with a proven track record of organic and strategic growth. This role improves synergies among our two business segments and centralizes core operational functions.
Parsons continues to win large strategic contracts in growing and enduring markets. During the third quarter, the Company won six contracts over $100 million, including three single-award contracts and its largest ever cyber contract, and prime positions on three multiple-award IDIQ vehicles. Parsons also joined Northrop Grumman's Ground Based Strategic Deterrent (GBSD) team. The Company's strong customer relationships, rigorous capture processes, and investments in technology and people are driving success in winning new contracts and expanding existing contracts.
- Awarded the new $590 million Combatant Commands Cyber Mission Support contract by the U.S. General Services Administration. Under the contract, Parsons will support multi-domain operations across cyber, space, air, ground, and maritime — researching, developing, testing, and evaluating tailored cyber solutions for cyberspace operations, advanced concepts and technologies, and integrating operational platforms. Our award of this contract was a result of the combined Parsons, Polaris Alpha, OGSystems and QRC Technologies acquisitions, unique mission understanding and a demonstrated ability to provide solutions that adapt at the pace of the evolving threat.
- Awarded a new $229 million contract by the U.S. Army Corps of Engineers to repair Bucholz Army Airfield, U.S. Army Kwajalein Atoll in the Republic of the Marshall Islands. This significant contract positions Parsons in the northern Pacific Rim for upcoming space and missile defense related projects.
- Awarded a $137 million contract modification for technology insertion and completing the testing and commissioning phase of the Department of Energy's Savannah River Salt Waste Processing Facility project.
- Announced that the Company joined the Northrop Grumman-led team pursuing the U.S. Air Force GBSD program. GBSD is a U.S. land-based intercontinental ballistic missile (ICBM) system that will replace Minuteman III missiles operated by the Air Force from 2028 onward.
- Selected by the Naval Information Warfare Systems Command as one of multiple awardees on the $968 million IDIQ contract to provide worldwide installation services for shore-based command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) and supporting systems.
- Selected by a classified customer as one of multiple awardees on a $750 million IDIQ contract to provide support to national security missions.
- Selected by the Air Force as one of multiple awardees on the $427 million Global Application Research, Development, Engineering and Maintenance IDIQ contract to perform research, development, prototyping, integration, testing, demonstration, deployment and maintenance of innovative technologies and concepts.
Parsons Corporation (NYSE:PSN) stock price history
The image below, obtained from Google, shows the stock price history of Parsons Corporation (NYSE: PSN) since its listing in early May 2019. And it's been a very good time for Parsons Corporation stockholders. At it's listing date it was trading at around $30 and its currently trading at $37.80. So the stock has grown by 26% over the last 5 months or so. The stock of Parsons Corporation is trading at a lot closer to its 52 week high of $39.05 than it is to its 52 week low of $29.03 which to us is a clear indication that the short term sentiment and momentum of the stock is very positive.
Recent coverage of Parsons
The extract below cover the latest from Parsons as obtained from TheStreet.com
CENTREVILLE, Va., Nov. 12, 2019 /PRNewswire/ -- Parsons Corporation (NYSE: PSN) today announced financial results for the third quarter ended September 30, 2019. CEO Commentary " Today, we are also announcing the promotion of Carey Smith to President in addition to her current role as Chief Operating Officer. This promotion recognizes Carey's contributions to our transformation and adds additional functions under her leadership to enhance support to our customers and customer-facing teams. We are excited about our future and plan to leverage our business momentum, technology-driven solutions and robust balance sheet to drive future growth and shareholder value."
CENTREVILLE, Va., Nov. 12, 2019 /PRNewswire/ -- Parsons Corporation (NYSE: PSN) today announced financial results for the third quarter ended September 30, 2019. CEO Commentary " Today, we are also announcing the promotion of Carey Smith to President in addition to her current role as Chief Operating Officer. This promotion recognizes Carey's contributions to our transformation and adds additional functions under her leadership to enhance support to our customers and customer-facing teams. We are excited about our future and plan to leverage our business momentum, technology-driven solutions and robust balance sheet to drive future growth and shareholder value."
Parsons Corporation (NYSE: PSN) latest stock valuation
So based on the earnings report of Parsons Corporation (NYSE:PSN) and the latest earnings guidance provided what do we value Parsons Corporation (PSN) stock at? Based on the earnings reported by the group our valuation model provides a target (full value) price for Parsons Corporation at $58.40 a stock (down slightly from our 2nd quarter 2019 earnings report valuation of Parsons Corporation). We therefore believe the stock of Parsons Corporation is undervalued
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $58.40 Therefore we believe the stock remains a good buy below $52.60. Therefore the current price is a good entry point into the stock based on our valuation models. We rate the stock of Parsons Corporation a strong buy
We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $58.40 Therefore we believe the stock remains a good buy below $52.60. Therefore the current price is a good entry point into the stock based on our valuation models. We rate the stock of Parsons Corporation a strong buy