Why Is KBR (KBR) Down 6.1% Since Last Earnings Report?

It has been about a month since the last earnings report for KBR Inc. (KBR). Shares have lost about 6.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is KBR due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

KBR Q4 Earnings & Revenues Beat on Solid Government Business

KBR posted better-than-expected results in fourth-quarter 2018. The positive performance was mainly backed by industry-leading organic growth in Government Services business. Also, it provided encouraging guidance for 2019 on the back of solid performance across the business in 2018.

The company reported adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate of 37 cents by 5.4%. Also, the reported figure increased 39.3% year over year from 28 cents per share a year ago.

Total revenues came in at $1.33 billion, up 41.9% year over year, backed by robust performance of Government Services and Technology business. Also, the reported figure surpassed the consensus mark of $1.25 billion.

Segmental Data

Revenues in the Government Services segment rose an impressive 77.9% year over year to $984 million. The upside was primarily driven by 31% organic growth, backed by on-contract growth, take-away wins and new work awarded under its portfolio of well-positioned contracting vehicles. Incremental revenues and accretive earnings from the acquisition of SGT and consolidation of Aspire added to the positives.

Technology’s revenues increased 12.3% year over year to $82 million. The growth was attributable to 12% rise in organic revenues, as the demand for the company’s innovative solutions grew across chemical, petrochemical and refining markets. Also, bundling of technology licenses with ancillary services, proprietary equipment and catalysts contributed to the upside.

Hydrocarbons Services revenues were down 15.2% year over year to $263 million.

As of Dec 31, 2018, total backlog came in at $13.5 billion compared with $10.6 billion in the corresponding period of 2017.

Of the total backlog, the Government Services segment booked $11 billion (up 31.7% year over year). Technology accounted for $594 million (up 53.5%) and the Hydrocarbons Services segment contributed $1.9 billion to the total backlog (up 4.1%). Backlog from the Non-strategic Business totaled $2 million (down 66.7%).

Liquidity & Cash Flow

As of Dec 31, 2018, KBR’s cash and equivalents were $739 million, up from $439 million at the end of 2017. In 2018, cash flow provided by operating activities totaled $165 million, lower than $193 million in the prior year.

Full-Year 2018 Review

In full-year 2018, the company reported adjusted earnings of $1.53 per share, up 2.7% on a year-over-year basis. Revenues of $4.9 billion also grew 17.8% from a year ago. Notably, the company’s book-to-bill ratio in 2018 was 1.2, excluding the workoff of its long-term privately financed initiatives (PFIs).

2019 Guidance

KBR initiated its full-year 2019 view. The company expects adjusted earnings per share in the band of $1.58-$1.73. Operating cash flows are projected in the range of $175-$205 million, reflecting operating cash flow to net income ratio of 90-110%. Moreover, effective tax rate is anticipated between 23% and 25%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

Currently, KBR has a great Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.


KBR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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.


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