Parsons’ second quarter saw revenue fall short of Wall Street expectations, with management attributing the decline to the wind-down of a major confidential contract. Despite the headline miss, the company reported margin improvement and strong free cash flow, thanks to robust organic growth in core business units. CEO Carey Smith explained that, excluding the confidential contract, Parsons achieved double-digit growth across most business lines and highlighted recent large contract wins and ongoing strength in both North American and Middle Eastern infrastructure markets.
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Parsons (PSN) Q2 CY2025 Highlights:
- Revenue: $1.58 billion vs analyst estimates of $1.60 billion (5.2% year-on-year decline, 0.9% miss)
- Adjusted EPS: $0.78 vs analyst estimates of $0.74 (5.7% beat)
- Adjusted EBITDA: $149.1 million vs analyst estimates of $146.3 million (9.4% margin, 1.9% beat)
- The company dropped its revenue guidance for the full year to $6.58 billion at the midpoint from $7.25 billion, a 9.2% decrease
- EBITDA guidance for the full year is $615 million at the midpoint, in line with analyst expectations
- Operating Margin: 6%, in line with the same quarter last year
- Backlog: $8.94 billion at quarter end, up 1.3% year on year
- Market Capitalization: $8.54 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 Q2 Earnings Call
- Tobey O'Brien Sommer (Truist): Asked about Parsons’ approach to the Golden Dome and FAA contracts. CEO Carey Smith detailed the company’s positioning and readiness, highlighting technical partnerships and prior experience.
- Andrew John Wittmann (Baird): Inquired about the impact of recent federal legislation on infrastructure business. Smith described a shift towards hard infrastructure and anticipated benefits from future transportation reauthorization.
- Sheila Karin Kahyaoglu (Jefferies): Questioned organic growth outlook and margin sustainability. CFO Matt Ofilos clarified that strong second-half growth is expected from awarded contracts, with margin improvement driven by program execution.
- Noah Poponak (Goldman Sachs): Sought details on Federal Solutions margin trajectory and risk of back-half acceleration. Ofilos attributed margin pressure to contract mix and investments, but expects a rebound as incentive fees and product deliveries ramp.
- Gautam J. Khanna (TD Cowen): Asked about changes in unbooked backlog and funding risk. Smith and Ofilos confirmed the strength of funded backlog and cash flow, with no material risk identified at this stage.
Catalysts in Upcoming Quarters
In the coming quarters, we will be watching (1) progress in ramping up both new and existing large infrastructure and federal contracts, (2) successful integration and contribution of Chesapeake Technology International to revenue and margin performance, and (3) any updates on major federal opportunities such as the FAA and Golden Dome contracts. Additionally, hiring trends and continued strength in funded backlog will be important indicators of execution.
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