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Infrastructure and growth in the oil and gas sector are hot topics. KBR (KBR - Free Report) could be in line to cash in from big projects in both areas. This Zacks #1 Rank (strong buy) is a value stock with a forward P/E of just 11.

KBR provides engineering and construction services to the energy, petrochemical and government sectors.

It is an especially big player in the natural gas industry, having designed and constructed, by itself or with partners, more than half of the world's operating liquefied natural gas (LNG) production capacity over the last 30 years.

KBR Surprised By 23% in the Second Quarter

On July 27, KBR reported its second quarter results and surprised on the Zacks Consensus for the 5th quarter in a row. Earnings per share were 65 cents compared to the consensus of 53 cents. It made 66 cents in the year ago quarter.

Consolidated revenue actually declined to $2.5 billion from $2.7 billion in the second quarter of 2010.

However, the company's largest Business Unit, the Hydrocarbons business group, saw revenue rise 10% to $1.1 billion.

The backlog also increased over the prior quarter in most of the Business Units.

Raised Full Year Guidance

Given the stronger than expected operating performance and control over general and administrative expenses, KBR raised its full year guidance to a range of $2.60 to $2.85 from its January guidance of $2.05 to $2.30.

Zacks Consensus Estimates Rise

Analysts raised estimates for the full year after the company's bullish EPS guidance revision.

The 2011 Zacks Consensus Estimate jumped to $2.69 from $2.37 per share over the last 2 months.

That is earnings growth of 30% compared to the $2.07 the company made in 2010.

Sell Off Has Made the Shares More Attractive

Shares of KBR had been on a 2-year tear until the recent stock market sell off.

With rising earnings estimates and a falling share price, KBR has even more attractive valuations.

In addition to a low P/E, the company has a price-to-sales ratio of only 0.5. A P/S ratio under 1.0 usually means a company is undervalued.

Its price-to-book ratio of 1.9 also indicates value as a P/B ratio under 3.0 more often than not indicates "value."

KBR also rewards shareholders in 2 ways.

On Aug 26, KBR also announced the Board had authorized a 10 million share repurchase program. The company also pays a dividend, currently yielding 0.7%.

The raising of earnings guidance for the full year in July was an optimistic signal that this infrastructure company was betting on growth, instead of recession.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at

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