Parsons (PSN) is a technology-focused defense, intelligence, security, and infrastructure engineering company.
Let’s take a look at what has changed in the company’s key risk factors that investors should know. (See Parsons stock charts on TipRanks)
Parsons Risk Factors
According to the new Tipranks Risk Factors tool, Parsons’ main risk category is Finance & Corporate, which accounts for 39% of the total 56 risks identified.
Since December, Parsons has updated its risk profile to introduce one new risk factor under the Legal & Regulatory category and changed one risk factor under the Macro & Political category.
Under the Taxation & Government Incentives sub-category, the company said, “Changes in tax laws may materially increase our provision for income taxes.”
Here, Parsons emphasizes that American President Joseph R. Biden’s Tax Plan, which was presented in 2021, proposes several significant changes to important elements of the U.S. Internal Revenue Code. Although it is unknown whether any of these provisions will be implemented, the company advises investors that any change in U.S. tax law might have a material and unfavorable impact on the company’s financials.
Further, the overall sector average for the Finance & Corporate risk factor is 38.6%, slightly less than the sector average of 39.3%.
Parsons Financial Performance
Now let us dive into the company’s financial performance for the second quarter.
Parsons reported weak earnings results, missing analysts’ expectations on both the top-line and bottom-line.
Revenues were $879 million, down 10% year-over-year, and lower than the consensus estimate of $984.97 million.
Meanwhile, Parsons posted earnings per share of $0.32 per share, which came in lower than the consensus expectation of $0.51 per share and declined 34.7% year-over-year.
CEO of Parsons, Carey Smith, said, “Although we continue to expect our second half results to exceed our first-half performance, we are reducing our outlook for the full year.”
Smith further added, “Our differentiated and complementary defense and critical infrastructure portfolios are well aligned with the Biden Administration’s priorities, and we remain excited about the future given the significant progress and tailwinds we are already seeing in the third quarter.”
Analysts’ Take
Bank of America Securities analyst Ronald Epstein recently downgraded the stock to Sell from Hold and decreased the price target to $35.00 from $45.00. This implies that shares are fully valued at current levels.
Epstein commented, “We see Parsons as well positioned to benefit from the Biden administration’s priorities at both Federal Solutions (FS) and Critical Infrastructure (CI). However, last week’s disappointing 2Q21 results and surprising outlook cut enhanced our existing concerns about execution of PSN’s margin and M&A integration strategies.”
Overall, the stock has a Hold consensus rating based on 1 Buy, 2 Holds, and 1 Sell.
As for price targets, the average PSN price target is $42.25, reflecting 12-month upside potential of 19.8% from current levels.
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