Tuesday, Stifel has increased the price target for Parsons Corp . (NYSE:PSN) to $97.00, up from the previous target of $95.00, while reaffirming a Buy rating on the shares. The adjustment follows a recent in-person non-deal roadshow (NDR) with the management team of Parsons, after which analysts expressed a positive outlook on the company's short to medium-term future.
The Stifel analyst noted that there had been concerns regarding Parsons potentially over-earning, citing a significant jump in sales expectations—from an investor day forecast of approximately $4.88 billion in 2025 to the current estimate of about $6.80 billion. Although there is some uncertainty in defining what "normal" organic growth looks like, with a current compound annual growth rate (CAGR) of around 17% compared to the previous estimate of around 5%, the analyst anticipates that this elevated growth rate will persist for several years.
The optimism is fueled by several factors, including an uptick in new projects, higher win rates, and an increased bidding pipeline. Specifically, Parsons' win rates have shown notable improvement, rising from 49% in 2022 to 66% in 2023, and reaching 78% year-to-date. Furthermore, the bidding pipeline has expanded from $42 billion to $56 billion.
The analyst underscored that the macroeconomic environment is expected to continue fostering growth, which seems not yet fully accounted for in the projections for 2025 and 2026. This scenario suggests that rising EBITDA estimates and the sustained nature of earnings could lead to an appreciation in the company's share value.
In other recent news, Parsons Corporation has been making significant strides in transportation and financial growth. The company was recently honored with the 2024 Innovation Transportation Solutions Award by the Women in Transportation Colorado Chapter for its work on the East Colfax (NYSE:ENOV) Avenue Bus Rapid Transit project in Denver. This project, known as The Lynx, is Denver's first BRT system and has been praised for its collaborative approach and sustainable design.
Investment firm TD Cowen upgraded its rating on Parsons from Hold to Buy, citing expected adjusted earnings per share growth of 18-20% for 2024-2025. The firm highlighted Parsons' strong market positions, robust booking trends, improving revenue mix, and attractive merger and acquisition strategy as key factors behind the upgrade.
In financial developments, Parsons reported record financial figures for the first quarter of 2024, with revenue reaching $1.5 billion, marking a 29% organic growth. The company's adjusted EBITDA and contract awards also hit record highs, attributed to strategic investments in software, integrated solutions, and tech-focused acquisitions. Following these results, Parsons has increased its 2024 financial guidance.
InvestingPro Insights
Following Stifel's optimistic price target increase for Parsons Corp. (NYSE:PSN), real-time data and analysis from InvestingPro further enriches the investment perspective. With a current market capitalization of $8.45 billion, Parsons is trading at a significant earnings multiple, with an adjusted P/E ratio for the last twelve months as of Q1 2024 standing at 96.11. This may suggest expectations of continued growth or a premium placed on the company's earnings potential.
InvestingPro Tips highlight that Parsons has been profitable over the last twelve months and is expected to sustain profitability this year. Additionally, the company has seen a strong return over the last five years, with a notable price uptick of 25.82% over the last six months and an impressive 68.13% one-year price total return as of the current year's day 177. These metrics align with Stifel's positive outlook and reinforce the company's robust performance in the market.
Investors seeking more in-depth analysis can find additional tips on Parsons Corp. at Investing.com/pro/PSN, with a total of 11 InvestingPro Tips available. For those considering an InvestingPro subscription, use coupon code UK10 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.