Parsons' fourth quarter results prompted a significant negative market reaction, as the company missed Wall Street’s revenue and profit expectations. Management attributed the underperformance to contract timing issues and the completion of a large confidential contract, which reduced overall revenue and backlog. CEO Carey Smith described the environment as “dynamic,” highlighting a 43-day government shutdown that delayed procurement activity and led to project deferrals, especially in the federal solutions segment. Despite these setbacks, Smith emphasized continued strength in critical infrastructure and noted that several new contract wins helped offset some of the volume decline.
Is now the time to buy PSN? Find out in our full research report (it’s free for active Edge members).
Parsons (PSN) Q4 CY2025 Highlights:
- Revenue: $1.60 billion vs analyst estimates of $1.67 billion (7.5% year-on-year decline, 4.1% miss)
- Adjusted EPS: $0.75 vs analyst expectations of $0.79 (4.9% miss)
- Adjusted EBITDA: $153.3 million vs analyst estimates of $159.4 million (9.6% margin, 3.8% miss)
- EBITDA guidance for the upcoming financial year 2026 is $645 million at the midpoint, in line with analyst expectations
- Operating Margin: 6.6%, in line with the same quarter last year
- Backlog: $8.72 billion at quarter end, down 2.1% year on year
- Market Capitalization: $6.50 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Parsons’s Q4 Earnings Call
- Sangita Jain (KeyBanc Capital Markets) asked if legacy program adjustments in critical infrastructure were complete and whether margin performance could be sustained. CEO Carey Smith confirmed legacy issues are behind them and projected further margin expansion in both critical infrastructure and federal solutions.
- Louie DiPalma (William Blair) questioned the addressable market for Parsons’ Drone Armor system and its export potential. Smith explained the system’s modular AI-driven design and outlined opportunities with the Department of Homeland Security and possible international deployments, subject to export controls.
- Gavin (UBS) inquired about repeated downward revisions to federal solutions revenue guidance and the approach to 2026 forecasting. Smith cited shutdown-related delays and material contract timing, while CFO Matt Ofilos described a more conservative stance on new contract awards in the upcoming year.
- John Gordon (Citi) asked about the drivers of margin guidance and the potential for upside. Ofilos highlighted recent margin expansion, the accretive impact of new contracts and M&A, and anticipated ongoing improvement, with a tilt toward higher margins in infrastructure.
- Andrew Wittmann (Baird) sought color on critical infrastructure’s book-to-bill sustainability and exposure to high-profile projects like the Hudson River Tunnel. Smith described demand as robust, with a plan for maintaining book-to-bill above 1.0, and downplayed financial exposure to delayed projects.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace of new contract awards and backlog replenishment, particularly in the federal solutions segment; (2) the ability of recent acquisitions to drive cross-selling and margin improvement; and (3) the progress of Middle East infrastructure and event-driven projects. Execution in these areas will be central to tracking Parsons’ performance amid ongoing federal budget uncertainty and procurement delays.
Parsons currently trades at $61.37, down from $70.21 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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