KBR, Inc. ( KBR ) recently disclosed an extensive restructuring of its business lines to focus on the core operational strengths. However, shares of the company went down 3% during the regular trading session on Dec 12, on broader market concerns.
The Strategic Plan
KBR's restructuring move is aimed at streamlining its operations along with reducing its overhead expenses. Therefore, the company has planned to depart its non-strategic businesses, which include Fixed Price, stand-alone Construction; Fixed Price EPC Infrastructure and U.S. Minerals; Fixed Price EPC Power; and Building Group businesses. Moreover, the company is considering its Canadian module fabrication and U.S. military deployed operations support businesses for the divestiture.
As outlined, KBR will now focus on driving growth from long-term Global government services contracts; and globalized project delivery and engineering and construction related services. Moreover, KBR will target providing varied consulting and technology services related to oil and gas and chemicals to boost technical and financial returns to its clients. Hence, effective Dec 31, KBR will operate under three new businesses namely Technology & Consulting, Engineering & Construction (E&C) and Government Services.
With the achievement of this extensive business transformation plan, KBR expects to reap annual operating expenses savings of around $200 million by 2016. However, the company anticipates incurring pre-tax charges (mainly non-cash) in the range of $800 million to $1 billion.
The business-restructuring plan of KBR is surely encouraging as it will simplify and arrange its organizational structure and strengthen the balance sheet position. This will, in turn, enhance the customer base of the company and pave the way for top-line growth in future.
Presently, KBR carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include AECOM Technology Corporation ( ACM ), Willdan Group, Inc. ( WLDN ) and Progressive Waste Solutions Ltd. ( BIN ). All three stocks sport a Zacks Rank #1 (Strong Buy).
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