Disease Outbreaks Don't Negate Cybersecurity Needs

National security used to be as simple as "air, land, and sea" defenses...

But in today's digital world, protecting our data and information systems is no less important than guarding our physical borders.

Cyber espionage has already plundered more than $1 trillion in intellectual property from the United States...

The risk of cyber sabotage is so high, the Defense Science Board – a committee of civilian experts who advise the U.S. Department of Defense on scientific and technical matters – recommends establishing a military branch dedicated to cybersecurity as quickly as possible...

JPMorgan Chase CEO Jamie Dimon even recently said cyberattacks "may very well be the biggest threat to the U.S. financial system"...

And cyberattacks on government agencies continue to grow...

Earlier this year, Texas state agencies were under attack from Iranian would-be hackers. Texas Gov. Greg Abbott said that the state government was facing more than 10,000 attacks per minute.

More recently, hackers attacked the U.S. Department of Health and Human Services in an attempt to slow the government's response to the ongoing coronavirus pandemic.

With the growing importance of data, cyberattack attempts will continue to escalate. Today's company works with governments to ensure they're protected against these kinds of attacks.

Booz Allen Hamilton (NYSE: BAH) is one of the biggest private contractors for the U.S. government. The company provides consulting, analytics, and cyber solutions for its clients.

The $8 billion company reached $7.3 billion in revenue in the last 12 months. It has more than 26,000 employees at 500 locations in 25 countries. And two-thirds of its staff have government security clearances.

Booz Allen landed its first federal government job in 1940 – a contract to double the size and improve the operational efficiency of the U.S. Navy. The company evaluated the Navy's readiness for war, its shipyards, its telephone systems, and its intelligence capabilities.

The U.S. Army liked what it saw and hired Booz Allen for the same purpose in 1941.

The company still enjoys a deep connection with the federal government, which makes it incredibly difficult for "competitors" to compete. In fiscal year 2019, 96% of BAH's annual revenue came from government contracts...

Defense accounted for 47% of annual revenues. Civilian agencies (like the departments of Homeland Security, Health and Human Services, Veterans Affairs, Treasury, and Justice) accounted for 26%. Intelligence agencies accounted for 23%, and non-government businesses made up the remaining 4%.

And Booz Allen is the most qualified in the industry...

It's the only company to hold all three of the U.S. government's elite cybersecurity designations – the National Security Agency's Cyber Incident Response Assistance and Vulnerability Assessment Service accreditations, and the General Services Administration's Highly Adaptive Cybersecurity Services schedule.

Market analyst Frost & Sullivan has named BAH the North American market leader in Managed and Professional Security Services. In August, Frost estimated Booz Allen has 11.4% market share, making it the No. 1 provider of cyber services for defense agencies.

Other government agencies have also enlisted Booz Allen's services... not just the defense sector.

In February, Booz Allen announced that it received a contract to become the Securities and Exchange Commission's ("SEC") top provider of cybersecurity services. The contract is worth $113 million over 10 years, and will see BAH implement "modernized cyber defenses" for the SEC.

The health services industry is also turning to Booz Allen...

The company was recently awarded a $147 million contract to provide IT support to the National Institute of Allergy and Infectious Diseases, a branch of the National Institutes of Health ("NIH"). Under this contract, Booz Allen will provide technical support and services to "protect public health around the world."

So even the agencies at the forefront of dealing with the coronavirus are trusting Booz Allen's services. Its role will get even more important as the amount of data on U.S. coronavirus cases continues to grow.

And more government deals are likely coming...

Now, Booz Allen's stock has fallen along with the rest of the broader market over the past few weeks. But it has actually beaten the S&P 500 Index by about 8% over the past month.

Booz Allen is one of the top companies in its industry. And with the growing threat of cyberattacks, government agencies will likely continue turning to the company for its services, creating a long-term tailwind for shares.