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On Thursday, Jefferies analyst Sheila Kahyaoglu adjusted the price target for Parsons Corp . (NYSE:PSN), a technology-focused defense, intelligence, security, and infrastructure engineering firm. The new price target is set at $85.00, reduced from the previous $100.00, while the Buy rating on the company’s stock remains unchanged. The adjustment comes as PSN shares have declined over 30% in the past six months, currently trading near their 52-week low of $61.70. According to InvestingPro analysis, the stock appears undervalued at current levels.
Kahyaoglu’s assessment reflects a cautious but optimistic outlook for Parsons. She noted that the company’s 2025 organic sales growth is anticipated to be around 5%, with growth in three out of four business segments limited by one confidential program. This program is expected to contribute approximately $375 million in revenue in 2025, falling short of its maximum potential value of $575 million. However, if the program reaches its full potential, there could be a 6% increase to earnings per share, reaching an estimated $3.55. This growth projection aligns with the company’s strong track record, as evidenced by its 24% revenue growth in the last twelve months. Get access to more detailed growth metrics and 10+ additional ProTips with InvestingPro.
The analyst also highlighted the Critical Infrastructure (CI) segment as a potential area for growth, with double-digit organic growth anticipated. Additionally, an aging legacy contract is nearing its end, which could pave the way for lower double-digit margins. Kahyaoglu forecasts the margins to be around 8.8% in 2025 and possibly reaching 9% in 2026.
In terms of valuation, Kahyaoglu suggests that a return to a 25% discount to the market on Free Cash Flow Yield could imply an approximate 30% upside to Parsons shares at the $85 price target. This adjustment in the price target reflects the balance between the constraints on growth and the potential for margin improvement and valuation upside.
In other recent news, Parsons Corporation reported its fourth-quarter 2024 earnings, revealing an earnings per share (EPS) of $0.78, which fell short of the anticipated $0.91. The company’s revenue also missed expectations, coming in at $1.73 billion against a forecast of $1.76 billion. Despite these results, Parsons achieved a full-year revenue exceeding $6.7 billion for the first time, with significant growth in adjusted EBITDA and contract awards. Truist Securities adjusted its outlook on Parsons, reducing the price target from $110.00 to $85.00, while maintaining a Buy rating, citing concerns over potential risks if a certain halted program does not resume. KeyBanc Capital Markets also lowered its price target for Parsons from $102.00 to $76.00, maintaining an Overweight rating due to lower than expected adjusted EBITDA and guidance for 2025. Both firms remain optimistic about Parsons’ long-term growth potential, with KeyBanc analysts expecting more clarity on the confidential program in the coming months. Parsons plans to continue its acquisition strategy in 2025, with expectations for 2-3 new acquisitions, as part of its growth outlook.
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