BofA Securities has double-downgraded its rating on Booz Allen Hamilton (BAH) stock after the defense and consulting company posted weak Q2 results and slashed its full-year outlook. The downgrade reflects concerns over the slowdown in the company’s Civil business segment, which accounts for about one-third of its revenue. BAH stock tanked 10% during Friday’s trading session.
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The research firm lowered the rating on BAH stock to Sell from Buy and sharply reduced the price target to $90 from $160.
Q2 Results Snapshot
The company’s adjusted earnings of $1.49 per share missed the analysts’ expectations of $1.51. Also, revenue declined 8.1% year-over-year to $2.89 billion and came in below the Street’s forecast of $2.97 billion.
The decline is driven by a 22% drop in the civil business, which the company attributed to a slowdown in contract awards and an uncertain government funding environment.
To address the revenue slowdown, Booz Allen is taking major cost-cutting measures, such as laying off senior-level positions.
Meanwhile, backlog grew 2.9% to $40 billion, and its book-to-bill ratio stood at 1.7x, suggesting strong long-term demand.
Lower Outlook
Importantly, Booz Allen has lowered its guidance for Fiscal 2026 due to ongoing budget uncertainties in the government sector.
It now projects revenue to be between $11.3 billion and $11.5 billion, down from the previous guidance of $12 billion to $12.5 billion. Also, adjusted EPS has been revised down to a range of $5.45 and $5.65 per share, compared to the earlier range of $6.20 to $6.55.
The company also warned that the ongoing U.S. government shutdown could have a further negative impact on its business.
BofA Warns of Steeper Civil Revenue Decline
BofA said it had “underestimated the extent of the challenges” in Booz Allen’s Civil business segment. The firm pointed to ongoing budget uncertainty and the looming threat of a government shutdown as key risks.
It now expects a 30% drop in Civil revenue in the second half of fiscal 2026 and the first half of fiscal 2027, far steeper than the earlier forecast of a 5% decline.
While Booz Allen continues to perform well in its National Security portfolio and advanced tech such as AI and cyber, BofA does not expect that to offset near-term pressure.
What Is the Price Target for BAH?
Turning to Wall Street, BAH stock has a Hold consensus rating based on two Buy, five Hold, and three Sell ratings assigned in the last three months. At $115.63, the average Booz Allen stock price target implies a 26.51% upside potential.
