For Immediate Release
Chicago, IL – July 27, 2022 – Today, Zacks Investment Ideas feature highlights Booz Allen Hamilton Holding Corp. BAH.
This Long-Term Market Winner Is Soaring to New Highs
There are years when we want to be invested in the top-performing growth companies, and years when holding more stable stocks makes a lot more sense.
We are clearly in the latter category this year.
And as we move further into the second half of 2022, investors are wondering where to allocate investment capital in a highly inflationary, slowing growth environment. While it may be tempting to try and pick a bottom in some of the former darlings that experienced stellar returns in previous years, history has shown us that many of these companies likely won’t return to their price highs anytime soon (and possibly not ever).
A much more prudent approach involves identifying stocks that are leading here and now. With many companies in sustained downtrends, the risk levels are higher as their stocks need to break through significant resistance and overhead supply levels. Buyers who are currently holding these stocks at a loss may sell into this recent rally as they get closer to a breakeven point.
We want to target stocks in established uptrends that are showing immunity to this year’s volatility. One way to identify top stocks in the current environment is to target leading industry groups. The Zacks Government Services industry is ranked in the top 20% out of approximately 250 industries. This industry is currently in positive territory on the year, all while the S&P 500 continues to hover in a deep correction.
Because the Government Services industry is ranked in the top half of all Zacks Ranked Industries, we expect it to outperform the market over the next 3 to 6 months. Quantitative research studies have shown that approximately half of a stock’s price movement can be attributed to its industry group. By targeting stocks within leading industries, we can provide a constant ‘tailwind’ to our investing results.
Let’s take a look at a top stock within this leading industry group.
Booz Allen Hamilton Holding Corp.
Booz Allen Hamilton provides management and technology consulting, analytics, engineering, mission operations, and cyber services to governments, corporations, and not-for-profit organizations globally. BAH also provides transformational solutions in the areas of artificial intelligence, machine learning, and predictive modeling. Booz Allen Hamilton was founded in 1914 and is based in McLean, VA.
BAH has constructed a reputable track record of earnings beats, having surpassed the mark in each quarter for the past five years running. The company most recently announced fiscal Q4 results back in May of $0.86 per share, a 3.61% surprise over the $0.83 estimate. BAH has delivered a trailing four-quarter average earnings surprise of 9.5%.
The broad-based services provider has witnessed steady growth over the years, with sales expected to climb 7.44% to $8.99 billion. Earnings are slated to grow 3.33% to $4.35 per share in the current fiscal year.
Zooming out a bit, note how steady the stock performance has been over the last decade. BAH has delivered investors a nearly 1,100% return versus the 188% return for the S&P 500 over this timeframe. This is the type of company we want to be invested in – one with both strong fundamentals as well as technicals.
What the Zacks Model Unveils
The Zacks Earnings ESP (Expected Surprise Prediction) identifies companies that have recently witnessed positive earnings estimate revision activity. The idea is that this more recent information can serve as a better predictor of the future, giving investors a leg up during earnings season. When combining a Zacks Rank #3 or better with a positive Earnings ESP, stocks produced a positive surprise 70% of the time according to our 10-year backtest.
With an Earnings ESP +4.41% and a Zacks Rank #3 (Hold) rating, another earnings beat may be in the cards for BAH investors when the company reports fiscal Q1 results later this week on July 29th. Make sure to keep an eye on BAH as we head further into the second half of the year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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