KBR Beats on Q3 Earnings, Raises 2018 Guidance, Shares Up

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KBR, Inc. 's KBR shares jumped more than 8% on Oct 30 following third-quarter 2018 results, wherein earnings topped analysts' expectation.

The company's adjusted earnings of 46 cents per share in third-quarter 2018 beat the Zacks Consensus Estimate of 39 cents by 18% and also increased 31.4% from 35 cents a year ago.

The company's revenues of $1,278 million lagged the consensus mark of $1,308 million but improved 23.6% year over year.

Strong organic growth from Government Services and Technology businesses, solid execution across all segments, accretive growth from Aspire and SGT, along with buoyant government contracting and hydrocarbons end markets led to the upside.

KBR, Inc. Price, Consensus and EPS Surprise

KBR, Inc. Price, Consensus and EPS Surprise | KBR, Inc. Quote

Segment Data

Government Services revenues rose an impressive 59.5% year over year to $928 million. The uptrend was mainly driven by 12% organic growth in the business and strong third-quarter bookings for Government Services, with a book-to-bill ratio of 1.3.

Also, Technology revenues recorded an increase of 35% year over year to $81 million. The increase was attributable to solid organic growth of 35% and strong demand for petrochemical, refining and agricultural technologies.

However, Hydrocarbons Services revenues were down 30.9% year over year to $268 million.

As of Sep 30, 2018, the company's total backlog was $13.5 billion compared with $10.6 billion as of Dec 31, 2017. Of the total backlog, about $11.04 billion is booked under the Government Services segment (up 34.9% on a year-over-year basis) and around $1.9 billion under the Hydrocarbons Services segment. While Technology accounted for $544 million of the backlog (up 95.7% on a year-over-year basis), Non-strategic Business contributed to $3 million (down from $6 million a year ago).

Liquidity & Cash Flow

As of Sep 30, 2018, KBR's cash and equivalents were $581 million, up from $439 million at the end of 2017.

In the quarter, cash flow provided by operating activities totaled $72 million, much higher than $28 million in the year-ago quarter.

2018 Guidance Raised

KBR increased its full-year 2018 guidance. The company currently expects adjusted earnings per share in the band of $1.45-$1.55 from $1.45-$1.50 expected earlier.

This guidance excludes legal costs associated with legacy U.S. Government contracts, as well as acquisition & integration-related expenses related to Aspire and SGT acquisitions. The estimated legacy legal fees exclude any future cost reimbursement from the U.S. Government.

The company maintained its expectation for operating cash flow, which is estimated in the range of $125-$175 million.

Zacks Rank & Stocks to Consider

KBR currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Construction sector include Jacobs Engineering Group Inc. JEC , MasTec, Inc. MTZ and EMCOR Group, Inc. EME , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Jacobs Engineering surpassed the consensus estimate in the trailing four quarters, with an average surprise rate of 15.4%.

MasTec and EMCOR's earnings per share are expected to increase 25% and 18% in 2018, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: EME , MTZ , JEC , KBR

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