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KBR (KBR) Down 54.3% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for KBR Inc. (KBR - Free Report) . Shares have lost about 54.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

KBR's Q4 Earnings & Revenue Beat Estimates

KBR, Inc. reported strong results in fourth-quarter 2019. The top and bottom lines beat the Zacks Consensus Estimate and improved year over year on continued solid organic growth across the business.

Adjusted earnings came in at 46 cents per share, beating the Zacks Consensus Estimate of 45 cents by 2.2%. The reported figure also increased 12.2% from 41 cents per share in the year-ago quarter.

Moreover, total revenues of $1.45 billion increased 9.2% year over year on the back of robust performance of each of its businesses. The top line also surpassed the consensus mark of $1.39 billion by 4.4%.

Adjusted EBITDA rose 7.3% year over year to $117 million in the quarter, backed by favorable close-out of a lump sum project in the non-strategic Business.

2019 Highlights

Adjusted earnings of $1.69 per share increased 10.5% from the 2018 level. Total revenues were $5.64 billion, reflecting an increase of 15% from a year ago, owing to double-digit growth in all operating segments. Adjusted EBITDA advanced 14% in the year.

Full-Year Segmental Details

Revenues in the Government Solutions segment grew 14% year over year to $3.93 billion. The upside can be attributed to the commencement of new programs, including holistic human and psychological performance services for the U.S. Special Operations Forces under the Preservation of the Force and Family program; networking, communications and training services for the U.K. Ministry of Defence; and launch range operations services at NASA's Wallops Flight Facility.

Technology Solutions' revenues increased 26% year over year to $374 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 16% year over year to $1.34 billion. The uptick was backed by the ramp up 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

As of Dec 31, 2019, total backlog came in at $14.64 billion compared with $13.5 billion at 2018-end. Of the total backlog, Government Solutions booked $10.96 billion. Technology Solutions and the Energy Solutions segment accounted for $579 million and $3.1 billion of the total backlog, respectively.

Book-to-bill in 2019 was 1.3x, excluding the impact of its private finance initiatives or PFIs and foreign exchange.

Liquidity & Cash Flow

As of Dec 31, 2019, KBR’s cash and equivalents were $712 million, down from $739 million at the end of 2018. At the end of 2019, operating cash flow totaled $256 million compared with $165 million in the year-ago period.

2020 Guidance

KBR expects adjusted earnings per share in the band of $1.80-$1.92. Operating cash flows are projected in the range of $200-$250 million, implying 90-110% net income conversion. KBR recently approved a 25% increase in quarterly dividend and restored share repurchase authorization of $350 million.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -6.34% due to these changes.

VGM Scores

At this time, KBR has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

KBR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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