Goldman Sachs has downgraded Booz Allen Hamilton (NYSE: BAH) from Neutral to Sell, assigning a price target of $94. The move comes in response to growing concern over the company’s reliance on federal contracts at a time when government spending is tightening. Booz Allen recently announced it will lay off roughly 2,500 employees, nearly 7% of its workforce, due to reduced revenues and profit margins.
The cuts stem largely from federal initiatives to review and reduce consulting expenditures, directly impacting Booz Allen’s ability to renew or extend key contracts. This has created a ripple effect, most notably in the non-defense sector where management expects double-digit declines. Revenue growth projections have been trimmed to 4% or less, and earnings forecasts have fallen below Wall Street expectations.
💸 Dividend Fundamentals
🔹 Annual Dividend: $2.20 per share
🔹 Dividend Yield: Approximately 2.04%
🔹 Payout Ratio: Around 28.66%, reflecting cautious capital allocation
Despite these setbacks, Booz Allen’s dividend remains comfortably covered, offering some cushion for income-focused investors. However, persistent pressure from Washington and structural adjustments signal a more challenging environment ahead. Investors will need to watch how the firm adjusts its strategy and cost structure in response to these federal budgetary headwinds.