Parsons Corporation, a name synonymous with infrastructure and defense, has been quietly making waves in the market. Their recent earnings call for Q1 2024 was a symphony of record-breaking numbers: record revenue, record adjusted EBITDA, record contract awards, record backlog. It's enough to make any investor's heart skip a beat. But beneath the surface of these impressive figures lies a hidden gem, an insight that seems to have eluded the keen eyes of Wall Street analysts: the potential of Parsons' environmental remediation business, specifically in the realm of PFAS mitigation.

While the market, and indeed the call itself, buzzed about mega-projects like the Hudson Tunnel and the allure of Saudi Arabia's Vision 2030, a seemingly innocuous comment from CEO Carey Smith hinted at a potent growth engine that could propel Parsons to even greater heights. Smith estimated that PFAS mitigation represents a staggering $40 billion addressable market for the company, a figure that dwarfs even the most ambitious infrastructure projects. This isn't just wishful thinking; Parsons already boasts a strong foundation in PFAS investigation and remediation, having completed nearly 2,000 PFAS investigations and designed, built, and installed over 7,000 PFAS point-of-entry treatment systems.

What makes this particularly compelling is the recent EPA announcement regarding PFAS. The agency has issued its first national drinking water standard to limit PFAS, also known as "forever chemicals." This landmark decision is poised to trigger a wave of remediation projects across the country. The EPA estimates that 6% to 10% of US public drinking water systems will require action to comply with the new standards. To facilitate this, the Bipartisan Infrastructure Bill has allocated $9 billion to help communities eliminate PFAS from their drinking water, with $1 billion readily available.

Parsons, with its proven expertise in PFAS mitigation, is uniquely positioned to capitalize on this emerging market. They are not just investigators and remediators; they design, build, and operate full-scale treatment plants for PFAS removal. This comprehensive capability, combined with the anticipated surge in demand, suggests that PFAS could become a significant contributor to Parsons' revenue and profitability in the coming years.

Estimating the Potential of Parsons' PFAS Business

While Parsons has not explicitly quantified the current size of their PFAS business, they did reveal that their environmental remediation portfolio currently constitutes about 12% of their overall revenue. Applying this percentage to their Q1 2024 revenue of $1.5 billion, we can estimate that their environmental remediation business generated roughly $180 million in revenue this quarter.

Assuming that PFAS currently makes up a modest portion of this, say 10%, that translates to approximately $18 million in PFAS revenue for Q1.

"Hypothetical Growth Scenario"

This simplified calculation highlights the immense potential of Parsons' PFAS business, a potential that seems to have gone unnoticed amidst the hype surrounding their mega-projects. While these large contracts are undoubtedly important, it's the less glamorous but steadily growing environmental remediation business, specifically in PFAS, that could prove to be the secret sauce to Parsons' sustained double-digit growth.

Visualizing Parsons' Growth Trajectory

The following chart depicts Parsons' projected revenue growth, with a hypothetical breakout of PFAS revenue, demonstrating its potential impact.

This hidden gem, nestled within Parsons' earnings transcript, offers a tantalizing glimpse into the company's future. It suggests that Parsons is not just riding the wave of infrastructure spending and geopolitical tensions; it's also strategically positioning itself at the forefront of an emerging market with immense growth potential. Investors would be wise to pay close attention to this hidden gem, as it could well become the driving force behind Parsons' continued success in the years to come.

"Fun Fact: Parsons played a critical role in the development of the Trans-Alaska Pipeline System, one of the largest and most challenging engineering projects in history."