KBR, Inc. (KBR Quick QuoteKBR - Free Report) recently announced that its Government Services business, KBRwyle, has clinched a multi-award task order contract from the U.S. Air Force's “Civil Engineer Center for engineering and construction” to support the U.S. military operations on a global scale. Revenues associated with this contract have been booked into the backlog of unfilled orders for KBR's Government Services business segment.

KBRwyle is one of the 11 awardees that have won this indefinite quantity/indefinite delivery (IDIQ) contract. The contract has a “five-year base period and three one-year options, with highest ceiling value of $950 million”. Per the deal, KBRwyle is eligible to compete on upcoming task orders to offer design, construction and engineering services to the U.S. Air Force.

KBRwyle remains confident that its extensive global reach, robust portfolio and ability to execute critical projects provide it a competitive edge over other awardees. As a matter of fact, KBR has earned solid reputation for providing mission-critical support for the U.S. government customers, for over six decades.

Of late, KBR’s Government Services business has been acting as a major growth catalyst. The company remains optimistic about the prospects of this business, primarily driven by lucrative contracts from the U.S. military as well as the UK Ministry of Defense. The segment is expected to execute almost $3 billion in contracts in 2017. KBR anticipates growth across all of its key markets in the U.S., UK and Australia, driven by consistent flow of opportunities across the lifecycle of projects.

Despite the flourishing Government Services business, the company has had a disappointing run on the bourse. Over the past six months, the stock returned a meager 1.1%, way lower than the Zacks Categorized Engineering/ R&D Services industry’s average gain of 17.9%. The pullback in share price was likely driven by KBR’s ongoing execution issues in certain major projects in the Engineering and Construction segment (“EPC”).

For quite some time now, KBR has been witnessing huge cash outflows to fund losses on the EPC projects. Also, reduced capital expenditure by key clients and currency fluctuations are fast eroding backlogs. These factors as well as escalating legal costs can prove detrimental to margins for this Zacks Rank #3 (Hold) company.

Zacks Rank & Stocks to Consider

Better-ranked stocks in the broader sector include II-VI Inc. , EnerSys (ENS Quick QuoteENS - Free Report) and Applied Industrial Technologies Inc. (AIT Quick QuoteAIT - Free Report) . While II-VI boasts a Zacks Rank #1 (Strong Buy), EnerSys and Applied Industrial Technologies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

II-VI Incorporated has registered a remarkable positive average surprise of 59.2% for the four trailing quarters, driven by strong, consecutive earnings beats throughout.

EnerSys has surpassed earnings estimates each time in the past four quarters, with an average positive beat of 4.4%.

Applied Industrial Technologies managed to beat estimates thrice over the last four quarters and has a positive earnings surprise of 6.2%.

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