Parsons Won’t Be Fixing the Air-Traffic Control Mess. Its Stock Is Tumbling.

The government selected Peraton as the prime integrator on the project to improve American’s air-traffic control systems. (Jim Vondruska/Getty Images)

Key Points

• Parsons’ stock slid after losing a bid to update America’s air-traffic control system.
• Privately held Peraton won the bid for the air-traffic control system modernization, which included $12.5 billion in funding.
• Analysts had anticipated Parsons’ potential win, with some of the expected work already factored into the stock’s valuation.

Expectations can hurt sometimes.

Shares of government contractor Parsons closed down on Friday after the government selected someone else to update America’s air-traffic control system. Investors thought that the business was going to Parsons.

The stock slid 21.1% to $66.65. The S&P 500 and Dow Jones Industrial Average both gained about 0.2%.

President Donald Trump’s One Big Beautiful Bill Act included $12.5 billion in funding for air-traffic control modernization, including $4.8 billion for telecom infrastructure, $3 billion for radars, $1.9 billion for air-traffic control centers, and $1 billion for Terminal Radar Approach Control Facilities, or TRACONs.

Privately held Peraton won the bid.

Parsons was the other prime bidder with its subcontractor IBM . “Parsons currently generates $150 million of annual FAA work on [support services], but had been confident in its bid for the new program that would have potentially 2X’d [the] scope of work, ” wrote Jefferies analyst Sheila Kahyaoglu on Thursday. Some of that extra work was priced into the stock. Parsons is expected to generate 2025 revenue of $6.5 billion.

IBM stock looked unaffected by the decision. It was up 0.2% at $308.72 in midday trading.

Kahyaoglu rates shares Hold and has a $90 price target for shares. William Blair analyst Louie DiPalma rates Parson shares Buy, but doesn’t have a price target for the stock. A Buy at Blair essentially means the broker expects a stock to outperform.

“We previously wrote that in the event that Parsons did not win BNATCS, we expected that Parsons shares still have upside to greater than $95 per share over the next year,” wrote DiPalma on Friday. “We stand by this view given the favorable industry tailwinds for its solutions.”

He still sees Parsons benefiting from air-traffic control modernization. Its existing support business can grow over time.

That might be the case. For now, investors are disappointed with the outcome of the bidding process.

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