Booz Allen Earnings, Outlook a Relief in Post-DOGE World. The Stock Is Dropping.

Coming into Friday trading, Booz stock was down about 11% this year. (Jason C. Andrew/Bloomberg)

Government services contractor Booz Allen delivered better-than-expected fiscal first-quarter numbers and raised its free cash flow guidance for the year. The stock fell, but results were a relief for investors who have fretted about government spending cuts for months.

For the quarter, Booz reported earnings per share of $1.48 from sales of $2.9 billion. Wall Street was looking for EPS of $1.45 from sales of $2.9 billion, according to FactSet.

The company ended the quarter with a record first-quarter backlog of $38 billion, with orders outstripping sales by 1.42 to one. The company also repurchased 1.1% of its shares outstanding.

Booz maintained its full-year earnings per share outlook. It expects EPS to land between $6.20 and $6.55. Wall Street projects $6.41 a share, according to FactSet. Booz increased its free cash flow guidance to a midpoint of $950 million, up from $750 million. Wall Street projects fiscal 2026 free cash flow of about $800 million.

Booz stock traded as high as $120.04, but gave up gains and closed down 1.8% at $113.05, while the S&P 500 and Dow Jones Industrial Average added 0.4% and 0.5%, respectively.

Down isn’t a great reaction, but Wall Street looks pleased with earnings. On the company’s conference call, “multiyear growth commentary…sounded constructive with Booz Allen returning to hiring growth and winning awards,” wrote Cantor Fitzgerald analyst Colin Canfield on Friday. He thought shares would be up Friday. Canfield rates shares Buy and has a $160 price target for the stock.

William Blair analyst Louie DiPalma wrote that Booz was “getting its groove back.” He rates shares Buy and doesn’t have a price target for shares.

Regrooving was needed. Booz stock dropped 16.5% after reporting fiscal 2025 fourth-quarter earnings in May. At the time, Wall Street was looking for fiscal 2026 sales of almost $13 billion. Booz guided to $12.3 billion.

Coming into Friday trading, Booz stock was down about 11% this year and down 25% over the past 12 months. Fears of government spending cuts spearheaded by the Department of Government Efficiency, once headed by Tesla CEO Elon Musk, weighed heavily on results and on the company’s valuation multiple.

Historically, Booz stock has traded at a premium to the S&P 500. A year ago, Booz stock traded for about 24 times estimated earnings expected over the next 12 months, while the S&P 500 fetched about 20 times. Now, Booz stock trades for about 17.4 times, while the S&P 500 trades for about 22.5 times.

Booz stock was trading around $128 a share before the disappointing May guidance and dropped below $100 a share in the aftermath of the quarter. At around $115 heading into Friday trading, shares were halfway back.

Blair’s DiPalma upgraded Booz shares to Buy from Hold on Monday, citing a strong June quarter. “Booz Allen historically has proven adept at navigating the political landscape,” he added. “We believe this is an opportunity for investors to grab shares of a franchise name at a discount.”

DiPalma is early with his bullish call. Overall, 33% of analysts covering the company rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P is about 55%. The average analyst price target is about $125 a share. DiPalma doesn’t have a price target for shares.

Hopefully, the worst is behind the company.

Write to Al Root at allen.root@dowjones.com