KBR, Inc.' s KBR subsidiary Brown & Root Industrial Services, LLC, recently announced that it has acquired a provider of turnaround, specialty, and construction related services - the MEI Group, LLC (MEI). This strategic buyout will help KBR's subsidiary boost its maintenance business and achieve sustainable growth opportunities, going forward.
Brown & Root Industrial Services: An Insight
Back in Jul 2015, KBR and private equity firm, Bernhard Capital Partners ("BCP"), entered into an agreement to set up their joint venture - Brown & Root Industrial Services. Brown & Root Industrial comprises KBR's Industrial Services Americas (part of KBR's Engineering & Construction Business Group) and BCP's portfolio company, WINK Engineering.
In the past one and a half year, Brown & Root Industrial has added over 2000 personnel and strengthened its brown field engineering & construction, scaffolding and heat tracing capabilities. The recent acquisition is a strategic fit for Brown & Root Industrial, fortifying its service portfolio by offering best in-class services to the customers.
Benefits of MEI Group Buyout
Headquartered in White Castle, MEI Group provides services to industrial facilities such as refinery, petrochemical and fertilizer, throughout the U.S. Gulf Coast region. Brown & Root Industrial intends to bolster its turnaround, specialty welding, construction and fabrication services with the MEI Group buyout.
This acquisition will further unlock multiple earnings opportunities for Brown & Root Industrial by increasing its access to lower-risk, smaller, recurring and annuity-type contracts. In addition, it will assist KBR's subsidiary in reducing its operating expenditure and pursue lucrative opportunities in the capital sector.
KBR INC Price
Acquisitions to Drive Growth
KBR has a penchant for acquisitions and strategic alliances for driving inorganic growth and expanding market share. During third-quarter 2016, the company made two major acquisitions to reinforce its government business. First, it completed the buyout of Wyle Inc., a provider of specialized engineering and technical services, for $570 million.
Second, it acquired Honeywell International Inc.'s HON technology development and engineering unit, Honeywell Technology Solutions, Inc. ("HTSI"). This buyout is expected to be conducive to earnings growth right from the next year. These acquisitions contributed $200 million to the Government Services revenues during the reported quarter. We believe that these strategic buyouts will bode well for the top-line expansion of the Zacks Rank #3 (Hold) company's core businesses.
Stocks to Consider
Better-ranked stocks in the industry include Applied Industrial Technologies, Inc. AIT and Smith Corp. AOS . Both stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Applied Industrial Technologies is one of North America's leading distributors of bearings, linear technologies, power transmission components, rubber products and specialty maintenance items to the MRO and OEM markets. The company managed to beat estimates thrice over the trailing four quarters and has a positive earnings surprise of 4.9%.
Headquartered in Milwaukee, WI, A.O. Smith is one of the leading manufacturers of commercial and residential water heating equipment, as well as water treatment products of the world. The company has an excellent earnings surprise history, beating estimates each time over the trailing four quarters, with an average positive surprise of 5.9%.
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