Parsons Stock Plunges 21% on FAA Contract Loss Despite $1B Sound Transit Win Volume Surges 794 to $760M Ranking 139th in U.S. Equity Trading

Market Snapshot

Parsons Corporation (PSN) experienced a significant decline in trading on December 5, 2025, with its stock falling 21.09% to close at $66.65. The company’s trading volume surged to $760 million, a 794.71% increase from the previous day, ranking it 139th in volume among U.S. equities. Despite securing a $1 billion design services contract with Sound Transit—a five-year agreement supporting the Puget Sound region’s $60 billion capital program—the stock’s sharp drop overshadowed this development. The intraday after-hours rally of 1.94% to $68.0 failed to reverse the broader sell-off, which followed the loss of a high-profile $12.5 billion air traffic control modernization contract to rival Peraton.

Key Drivers

FAA Contract Loss and Analyst Reactions

The most immediate catalyst for Parsons’ stock plunge was the U.S. Federal Aviation Administration’s (FAA) decision to award the prime integrator role for the Brand New Air Traffic Control System (BNATCS) to Peraton, a move that stunned investors and analysts. This $12.5 billion project—part of a broader $31.5 billion modernization effort—had been widely anticipated to bolster Parsons’ revenue, particularly given its existing $150 million annual FAA support work. Raymond James downgraded the stock from “Strong Buy” to “Market Perform,” citing the “major surprise” of the loss and its impact on organic growth projections for 2026 and 2027. Analysts noted that the stock had traded at a 35% premium to peers due to expected contract wins, a valuation gap that now appeared at risk of narrowing sharply.

Sound Transit Win and Strategic Resilience

While the FAA setback dominated headlines, Parsons secured a $1 billion ceiling Multiple Award Task Order Contract (MATOC) with Sound Transit, underscoring its core competencies in infrastructure design. The five-year agreement, renewable for two additional years, aligns with the company’s long-term focus on transportation and urban development. CEO Mark Fialkowski emphasized the win as a testament to Parsons’ “proven ability to deliver innovative, cost-effective solutions for complex transit programs.” This contract, part of Sound Transit’s $60 billion capital initiative, includes projects such as light rail extensions and sustainability improvements, reinforcing the firm’s position in the Pacific Northwest. However, the stock’s inability to rebound suggests investors viewed the Sound Transit award as insufficient to offset the FAA loss in the short term.

Broader Contract Activity and Analyst Outlooks

Beyond the FAA and Sound Transit developments, Parsons added a $441 million design-build project with the Missouri Highways and Transportation Commission to modernize a critical Interstate 70 corridor. The ESS-Parsons team’s experience with 15 prior I-70 projects highlights the company’s technical expertise, though the contract’s scale pales in comparison to the lost FAA opportunity. Additionally, the firm secured a $3.5 billion position on the Defense Threat Reduction Agency’s Cooperative Threat Reduction Integration Contract, further diversifying its federal portfolio. Analysts like William Blair’s Louie DiPalma maintained a “Buy” rating, arguing that long-term growth drivers—including missile defense, border security, and Middle Eastern infrastructure—remain intact. However, near-term optimism was tempered by the FAA loss, which analysts described as a “dents the psyche of the stock” and reduced visibility on 2026 revenue.

Market Sentiment and Valuation Implications

Parsons’ stock had entered the week trading at a P/E ratio of 39.26 and a PEG ratio of 5.41, metrics that Raymond James deemed indicative of overvaluation relative to growth expectations. The FAA contract loss exacerbated concerns that the stock’s premium to peers might contract by “half or more,” particularly as future catalysts became less certain. Despite these headwinds, some analysts, including Jefferies’ Sheila Kahyaoglu, maintained a $90 price target, citing the company’s broader infrastructure tailwinds. The stock’s 21.09% decline marked its largest single-day drop since its 2020 IPO, with shares now trading 31% below their 52-week high. While the immediate outlook remains clouded, the firm’s diversified federal contract pipeline and strong balance sheet—highlighted by an “GOOD” financial health score—suggest potential for a gradual recovery.

Summary of Key Themes

The interplay of two major contract outcomes defined Parsons’ performance: the FAA loss, which triggered a sharp sell-off, and the Sound Transit and Missouri I-70 wins, which provided partial offset. Analysts and investors appear to have recalibrated expectations, with near-term revenue growth now hinging on smaller-scale projects and medium-term opportunities in defense and infrastructure. The stock’s valuation correction reflects a reassessment of its growth trajectory, though long-term fundamentals—including a robust federal client base and expertise in critical infrastructure—remain intact. As the company navigates this transition, market reactions will likely hinge on its ability to secure high-impact contracts and demonstrate executional consistency in its current portfolio.