KBR's Stock Jumps 12% on Q3 Earnings Beat & Upbeat View

KBR, Inc. KBR reported strong results in third-quarter 2019. The top and bottom line beat the Zacks Consensus Estimate and improved year over year on continued solid organic growth across the business. Following the results, the company’s shares increased 12.1% on Oct 30.

Also, the company raised its 2019 guidance.

Adjusted earnings came in at 45 cents per share, beating the Zacks Consensus Estimate of 44 cents by 2.3%. The reported figure also increased 4.7% year over year from 43 cents in the year-ago quarter.

Moreover, total revenues of $1.43 billion increased 11.5% year over year (all organic) on the back of robust performance by each of its respective businesses. The top line also surpassed the consensus mark of $1.42 by 0.3%.

Adjusted EBITDA rose 9.2% year over year to $131 million in the quarter, backed by favorable close-out of a lump sum project in its non-strategic Business.

Segmental Data

Revenues in the Government Solutions segment grew 5.4% year over year to $978 million. The upside can be attributed to new work awarded under its portfolio, which includes a project for the defense health agency and operations contract with NASA.

Technology Solutions' revenues increased 18.5% year over year to $96 million. The improvement can be attributed to strong execution across its chemical, petrochemical, refining and ammonia projects. Also, higher proprietary equipment sales contributed to the upside.

Energy Solutions' revenues increased 31% year over year to $351 million. The uptick came on the back of cost-reimbursable projects, including a brownfield revamp refinery project in the U.S. Gulf Coast, a crude terminal expansion project in the Permian Basin and a greenfield methanol project in Louisiana.

Backlog & Major Wins

As of Sep 30, 2019, total backlog came in at $14.64 billion compared with $13.5 billion at 2018-end. Of the total backlog, Government Solutions booked $10.74 billion. Technology Solutions accounted for $474 million and the Energy Solutions segment contributed $3.43 billion to the total backlog. Moreover, backlog from the Non-strategic Business totaled $1 million.

Third-quarter 2019 book-to-bill was 2.1x, excluding the workoff of its private finance initiatives, or PFIs.

The major contract wins includes a reimbursable contract in its Energy Solutions business which provide EPC services of delivering methanol operating plant for its Methanex located adjacent facilities.

The company inked a reimbursable agreement with its business — Energy Solutions — for delivery of EPC services to its Methanex plant and adjacent facilities.

Also, the Government Solutions won a new five-year $200-million contract to provide launch range operations at NASA's Wallops Flight Facility.

KBR, Inc. Price, Consensus and EPS Surprise


KBR, Inc. Price, Consensus and EPS Surprise

KBR, Inc. price-consensus-eps-surprise-chart | KBR, Inc. Quote


Liquidity & Cash Flow

As of Sep 30, 2019, KBR’s cash and equivalents were $681 million, down from $739 million at the end of 2018.

At the end of the third quarter, operating cash flow totaled $199 million compared with $36 million in the year-ago period.

2019 Guidance

KBR expects adjusted earnings per share (EPS) in the band of $1.64-$1.74 compared with the prior expectation of $1.58-$1.73. Operating cash flows are projected in the range of $200-$225 million ($175-$205 million projected earlier).

Zacks Rank & Key Picks

Currently, KBR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Construction Sector include Aegion Corporation AEGN, AECOM ACM and Jacobs Engineering Group Inc JEC. Aegion sports a Zack Rank #1(Strong Buy), whereas AECOM and Jacobs each carry a Zacks Rank #2 (Buy).

Aegion has an impressive long-term earnings growth rate of 10%

AECOM has three-five year expected EPS growth rate of 9.3%.

Jacobs current year earnings are expected to rise by 9.4%.

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