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Parsons (PSN)
NYSE:PSN
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Parsons
(NYSE:PSN)
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Rating:62Neutral
Price Target:
$74.00
▲(15.10% Upside)
Action:ReiteratedDate:02/12/26
The score is driven primarily by solid underlying fundamentals and cash flow quality, supported by generally manageable leverage, but tempered by questionable 2025 financial statement anomalies and rising debt. Earnings call takeaways are moderately positive (margin/cash guidance, backlog strength) but offset by the confidential-contract headwind and Federal Solutions execution/collections risks. Technical signals are largely neutral and do not add strong support, while valuation appears reasonable at ~19.8x earnings without dividend yield support.
Positive Factors
Cash generation & FCF conversion
Consistent, high free cash flow conversion indicates Parsons converts reported earnings into cash effectively, supporting capital allocation for M&A, buybacks, and debt service. Over 2–6 months this underpins financial flexibility, lowers refinancing risk, and funds strategic investments without reliance on external financing.
Backlog & funded pipeline
A large, highly funded backlog and multi‑billion pipeline provide durable revenue visibility and smoothing against cyclical dips. Over the medium term this backlog supports predictable revenue conversion, advantaging Parsons in bidding and capacity planning and reducing top‑line volatility while enabling targeted growth investments.
Margin expansion & CI outperformance
Improving adjusted EBITDA and margin expansion reflect operational leverage and better program execution, notably in Critical Infrastructure where margins widened materially. Sustained margin improvement enhances free cash flow potential and resilience, supporting long‑term targets for double‑digit adjusted EBITDA by 2028.
Negative Factors
Confidential fixed‑price contract headwind
A material, multi‑year fixed‑price confidential program that reduces near‑term revenue and skews comparables poses lasting risks to organic growth metrics and margin comparability. It can constrain reported growth and complicate resource allocation, making performance lumpy and obscuring the underlying portfolio trend for several quarters.
Federal Solutions execution & collections risk
Execution challenges on federal programs and extended DSO indicate program delivery and collections strain in a core segment. Persisting execution or collections issues can depress margins, increase working capital needs, and raise funding costs, weakening sustainable cash conversion and complicating backlog realization over the medium term.
2025 reporting anomalies & rising debt
Abnormal 2025 income statement fields undermine trend reliability and investor confidence while rising debt levels reduce balance sheet headroom. Data‑quality anomalies combined with higher leverage increase execution and refinancing risk, making it harder to assess organic performance and plan durable capital allocation over coming quarters.
Parsons (PSN) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$6.74B
Dividend YieldN/A
Average Volume (3M)1.13M
Price to Earnings (P/E)30.0
Beta (1Y)0.78
Revenue Growth-0.24%
EPS Growth389.03%
CountryUS
Employees20,000
SectorTechnology
Sector Strength88
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)0.75
Shares Outstanding105,831,020
10 Day Avg. Volume1,608,193
30 Day Avg. Volume1,130,930
Financial Highlights & Ratios
PEG Ratio12.09
Price to Book (P/B)2.50
Price to Sales (P/S)1.04
P/FCF Ratio16.07
Enterprise Value/Market Cap1.17
Enterprise Value/Revenue1.24
Enterprise Value/Gross Profit5.53
Enterprise Value/Ebitda14.35
Forecast
1Y Price Target
$81.64Price Target Upside26.99% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering14
EPS Forecast (FY)3.31
Revenue Forecast (FY)$6.69B
Parsons Business Overview & Revenue Model
Company DescriptionParsons Corporation provides integrated solutions and services in the defense, intelligence, and critical infrastructure markets in North America, the Middle East, and internationally. It operates through two segments, Federal Solutions and Critical Infrastructure. The company offers cyber security and intelligence services, as well as offensive and defensive cybersecurity platforms, tools, and operations to the U.S. Department of Defense and the United States intelligence community; space and geospatial solutions, such as geospatial intelligence, threat analytics, space situational awareness, small satellite launch and integration, satellite ground systems, fight dynamics, and command, and control solutions to the National Geospatial-Intelligence Agency, National Reconnaissance Office, and multiple units within the U.S. Department of Defense. It also provides missile defense and C5ISR solutions, such as integrated air and missile defense, data fusion and analytics, platform system integration, directed energy, joint all-domain operations, and command and control systems to Defense Intelligence Agency and the U.S. Department of Defense; technology services for energy production systems, aviation, healthcare and bio-surveillance systems, and environmental systems and associated infrastructure, as well as nuclear waste processing and treatment, weapons of mass destruction elimination, program and project management, infectious disease control analytics, and data protection solutions. In addition, the company offers intelligent transportation system management, aviation, rail and transit systems, smart cities software, and critical infrastructure cyber protection to the transportation authorities, rail, and transit entities; engineering services for infrastructure; and program management, and environmental solutions to private-sector industrial clients and public utilities. Parsons Corporation was founded in 1944 and is headquartered in Centreville, Virginia.
How the Company Makes MoneyParsons generates revenue through a combination of government contracts, private sector projects, and technology solutions. The company’s primary revenue streams include contract-based work for defense and intelligence agencies, infrastructure projects for municipal and federal governments, and cybersecurity services for commercial clients. Significant partnerships with government organizations and other private entities enhance its service offerings and create additional revenue opportunities. Moreover, the company invests in innovative technologies that increase its competitiveness in secure and infrastructure-related projects, contributing to its earnings.
Parsons Earnings Call Summary
Earnings Call Date:Feb 11, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 06, 2026
Earnings Call Sentiment Positive
The call highlighted strong multi-year growth, record adjusted EBITDA margins, full-year 100% free cash flow conversion, robust funded backlog and a large pipeline, alongside strategic M&A and continued share repurchases. However, material challenges remain in the Federal Solutions segment driven by a large confidential fixed‑price contract, execution issues on a remote program, elevated DSO, and a near‑term organic growth headwind reflected in 2026 guidance. Overall the company presented stronger operational and financial momentum in critical infrastructure and a clear strategy to expand margins and capabilities, while acknowledging specific federal execution and timing headwinds.Q4-2025 Updates
Positive Updates
Full-Year Revenue Growth (Excluding Confidential Contract)
Total revenue for fiscal year 2025 increased 12% year-over-year and was up 8% on an organic basis excluding the confidential contract; three-year total revenue increased 52% (CAGR ~10% organic; 9% CAGR excluding confidential).
Record Adjusted EBITDA and Margin Expansion
Fiscal 2025 adjusted EBITDA reached a record $609 million (up 1% vs. 2024) and adjusted EBITDA margin expanded 60 basis points to a company record of 9.6%; Q4 margin expanded 110 basis points to 9.6%.
Strong Free Cash Flow Conversion and Operating Cash Flow
Delivered 100% free cash flow conversion for fiscal 2025 and exceeded the high end of cash flow guidance; reported operating cash flow of $168 million in Q4, up 32% year-over-year.
Backlog, Funded Backlog and Pipeline Strength
Total backlog of $8.7 billion; funded backlog $6.4 billion (up 8% YoY) representing a company record 73% of total backlog. Management cites a $55 billion pipeline and $11 billion of awarded but not yet booked contracts.
Large Contract Wins and Booking Activity
Won 15 contracts >$100 million in the year (matching prior year). Notable Q4 awards: $392M 10-year biometric contract (booked $36M), $200M 5-year classified single-award (booked $23M), $125M 5-year HPC program (booked $44M), >$100M rocket motor manufacturing program (booked full). Post-quarter: FAA option exercised early ($593M) and intent to award up to $500M sole-source (booked $13M).
Critical Infrastructure Outperformance
Critical Infrastructure (CI) Q4 revenue up $89M (+12% YoY), organic growth 9%; CI adjusted EBITDA $87M in Q4 (up 87% YoY) with margin of 10.6% (up 420 bps). CI recorded 21 consecutive quarters with book-to-bill ≥1.0 and full-year CI adjusted EBITDA up 73% with margin expansion of 350 bps to 10.4%.
Disciplined Capital Deployment and Share Repurchases
Completed three acquisitions in 2025 (Applied Sciences among them) and increased share repurchases (Q4 repurchase ~856k shares for $60M; full year ~1.8M shares for $125M). Deployed over $1.1B on acquisitions, CapEx and buybacks since 2023 while maintaining a strong balance sheet.
Strategic M&A to Expand Capabilities
Closed Altamira acquisition post-quarter (all-cash transaction up to $375M incl. $45M earn-out) to expand signals intelligence, space, and multi‑intelligence capabilities; management emphasizes accretive acquisition strategy targeting >10% adjusted EBITDA margins.
Guidance and Long-Term Targets
2026 guidance: revenue $6.5–$6.8B (midpoint +4.5% YoY; +0.5% organic at midpoint with a disclosed $345M headwind from the confidential contract), adjusted EBITDA $615–$675M (midpoint margin ~9.7%), operating cash flow $470–$530M. Long-term targets reiterated: mid-single-digit+ organic growth, goal of double-digit margins by 2028, and ≥100% free cash conversion.
Negative Updates
Federal Solutions Revenue and Margin Pressure
Federal Solutions faced significant headwinds: total federal revenue (including confidential contract) decreased ~20% for the full year and decreased 22% in Q4; federal adjusted EBITDA declined 32% for the year and 34% in Q4, with FY federal margin down 170 bps to 8.7%. Management cited lower volume on a fixed-price confidential contract and execution challenges on a remote program.
Material Headwind from Confidential Fixed-Price Contract
Company noted approximately $1 billion revenue headwind in 2025 from an accretive confidential fixed-price contract; for 2026 the confidential contract creates a $345 million year-over-year headwind (with $275 million realized within 2026), pressuring comparables and organic growth rates.
Q4 Enterprise Book-to-Bill Below 1.0
Enterprise book-to-bill in Q4 was 0.9x; Federal Solutions book-to-bill was 0.8x for both Q4 and full year, reflecting booking cadence weakness in the segment despite management expecting improvement into 2026.
Revenue Below Expectations in Q4
Management acknowledged that fourth quarter revenue was below expectations (despite 11% total growth YoY and 8% organic excluding the confidential contract), attributing some impact to the longest government shutdown in history.
Net DSO and Collections Timing
Net days sales outstanding (DSO) rose to 67 days at Q4-end, a 12-day increase YoY, primarily driven by lower volume on the confidential contract and timing of collections in the Middle East.
Pro Forma Leverage Increase After M&A
Net debt leverage ended Q4 at 1.3x, but management indicated pro forma leverage would be ~1.8x including the Altamira cash acquisition—higher leverage that investors should monitor despite continued balance sheet strength.
Execution Challenges on Specific Programs
Management disclosed recent execution challenges on a program in a remote region that negatively impacted Federal Solutions adjusted EBITDA in the quarter.
Guidance Reflects Near-Term Modest Organic Growth
2026 guidance implies modest organic growth at the midpoint (0.5% reported organic growth) due to the confidential contract headwind; while the rest of the portfolio is projected to grow double-digit, the headline organic rate is muted.
Company Guidance
Parsons guided 2026 revenue of $6.5–$6.8 billion (midpoint +4.5% y/y; +0.5% organic) while noting a ~$345 million y/y headwind from a confidential contract (about $275M of that impacts 2026); excluding that program the portfolio is expected to grow ~10.5% total and ~6% organic. Adjusted EBITDA is guided to $615–$675 million (≈9.7% margin at the midpoint, roughly +6% EBITDA growth and ~10 bps margin expansion vs. 2025 midpoint), operating cash flow $470–$530 million (midpoint ≈+4.5% and targeting 100% free cash flow conversion of adjusted net income), and CapEx rising to ~1.5% of revenue. Management reiterated long‑term targets of mid‑single‑digit+ organic revenue growth, double‑digit adjusted EBITDA margins by 2028, ≥100% free cash conversion and accretive M&A, and highlighted supporting metrics: $8.7B total backlog ($6.4B funded, 73% funded), $11B of awarded but not yet booked contracts, a trailing‑12M book‑to‑bill ~1.0, and Q4 net debt leverage of 1.3x (pro‑forma ~1.8x including Altamira).Parsons Financial Statement Overview
Summary
Cash flow quality is a strength (consistently positive operating/free cash flow with solid conversion vs earnings), and leverage looks generally manageable with improving ROE in 2022–2024. Offsetting this, debt rose in 2024–2025 and the 2025 annual income statement shows highly abnormal revenue/margin fields, reducing confidence in the latest reported trend.Income Statement
Revenue and earnings expanded strongly from 2022–2024 (revenue up meaningfully with steady improvement in net profit margin from ~2.3% to ~3.5%). Profitability looks consistent rather than exceptional: gross margin held around the low-20% range and operating profitability stayed in the mid-single digits. The main concern is the 2025 annual data showing an extreme revenue collapse and distorted margin fields (e.g., gross profit margin at 0%), which raises data-quality/one-off reporting risk and reduces confidence in the latest trend.58
Neutral
Balance Sheet
Leverage appears manageable for the profile: debt-to-equity generally sits around ~0.4–0.6, and equity has grown over time alongside assets. Returns on equity were solid in 2022–2024 (improving to roughly 9.7% in 2024), suggesting the balance sheet is being used productively. However, total debt increased materially in 2024–2025 versus earlier years, and the 2025 return on equity is effectively near-zero (likely impacted by the same 2025 income statement anomaly), which is a watch item.66
Positive
Cash Flow
Cash generation is a relative strength: operating cash flow and free cash flow are consistently positive, and free cash flow has generally tracked close to reported earnings (around ~87%–91% in 2020–2024). Free cash flow growth is strong in several years, including a notable acceleration in 2023 and continued growth into 2024, and the 2025 annual figure shows another large increase. The key weakness is that operating cash flow covers only about ~0.20–0.31 of total debt across the period, implying debt paydown capacity is moderate rather than robust.72
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 6.36B | 6.75B | 5.44B | 4.20B | 3.66B |
| Gross Profit | 1.43B | 1.41B | 1.21B | 946.72M | 852.82M |
| EBITDA | 552.19M | 518.48M | 415.52M | 309.91M | 274.49M |
| Net Income | 241.14M | 235.05M | 161.15M | 96.66M | 64.07M |
Balance Sheet | |||||
| Total Assets | 5.77B | 5.49B | 4.80B | 4.20B | 3.83B |
| Cash, Cash Equivalents and Short-Term Investments | 466.39M | 453.55M | 272.94M | 262.54M | 342.61M |
| Total Debt | 1.48B | 1.42B | 927.15M | 916.41M | 799.14M |
| Total Liabilities | 3.00B | 2.95B | 2.43B | 2.10B | 1.89B |
| Stockholders Equity | 2.64B | 2.42B | 2.29B | 2.04B | 1.90B |
Cash Flow | |||||
| Free Cash Flow | 410.41M | 474.39M | 367.30M | 206.93M | 184.47M |
| Operating Cash Flow | 478.38M | 523.61M | 407.70M | 237.53M | 205.57M |
| Investing Cash Flow | -254.00M | -556.72M | -375.97M | -417.47M | -240.91M |
| Financing Cash Flow | -215.68M | 218.75M | -21.87M | 100.37M | -106.50M |
Parsons Technical Analysis
Negative
64.29
Price Trends
66.46
Negative
74.76
Negative
74.23
Negative
Market Momentum
-1.43
Positive
43.65
Neutral
53.33
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PSN, the sentiment is Negative. The current price of 64.29 is below the 20-day moving average (MA) of 67.18, below the 50-day MA of 66.46, and below the 200-day MA of 74.23, indicating a bearish trend. The MACD of -1.43 indicates Positive momentum. The RSI at 43.65 is Neutral, neither overbought nor oversold. The STOCH value of 53.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PSN.
Parsons Risk Analysis
Parsons disclosed 56 risk factors in its most recent earnings report. Parsons reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 3 New Risks
1.
Risk Related to Our Common Stock Q4, 2025
2.
Changes in global tax laws or their interpretation could have a material impact on our effective income tax rate. Q4, 2025
3.
Risk Relating to Our Business Q4, 2025
Parsons Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $10.99B | 32.43 | 18.25% | 0.70% | 4.18% | 16.05% | |
77 Outperform | $12.45B | 33.67 | 24.96% | 1.28% | 2.37% | -6.93% | |
77 Outperform | $12.04B | 51.41 | 12.76% | ― | 12.60% | 24.02% | |
62 Neutral | $6.74B | 29.99 | 9.53% | ― | -0.24% | 389.03% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
61 Neutral | $14.50B | 52.01 | 4.27% | 0.97% | -4.99% | 22.16% | |
60 Neutral | $8.28B | ― | -6.20% | ― | 0.27% | -159.24% |
* Technology Sector Average
PSN
Parsons
64.69
4.45
7.39%
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MIDD
The Middleby
161.01
-8.24
-4.87%
WTS
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330.77
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54.81%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.