What Happened?
Shares of infrastructure and defense services provider Parsons (NYSE: PSN) fell 21.9% in the afternoon session after the company lost out on a significant government contract to upgrade the U.S. air traffic control system.
The contract was instead awarded to competitor Peraton, an outcome that reportedly surprised investors and removed a key expected catalyst for the company. Following the announcement, Truist Securities lowered its price target on Parsons' stock to $90 from $100, noting the company now faced 'less defined catalysts.' The negative market reaction occurred despite other positive news that Parsons was selected as an awardee for a separate $3.5 billion contract with the Defense Threat Reduction Agency. However, investors appeared to focus more on the loss of the Federal Aviation Administration (FAA) project.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Parsons? Access our full analysis report here.
What Is The Market Telling Us
Parsons’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for Parsons and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 10 months ago when the stock dropped 11.1% on the news that the company reported disappointing fourth quarter earnings: its revenue, EPS, and EBITDA fell short of Wall Street's estimates along with its full-year revenue and EBITDA guidance. Parsons beat analysts' backlog expectations this quarter, but the weaker outlook implies the conversion of its backlog into sales will take longer than anticipated. Overall, this was a tough quarter.
Parsons is down 28% since the beginning of the year, and at $65.16 per share, it is trading 34.1% below its 52-week high of $98.88 from December 2024. Investors who bought $1,000 worth of Parsons’s shares 5 years ago would now be looking at an investment worth $1,817.
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