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KBR's Earnings Beat, Revenues Fall Short of Estimates in Q4

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KBR, Inc. (KBR - Free Report) reported impressive results for fourth-quarter 2020, wherein earnings topped the Zacks Consensus Estimate. Also, earnings and revenues increased year over year. However, following the announcement, shares of the company dropped 0.8% during trading hours on Feb 22.

During the quarter, the company completed the acquisition of Centauri, accelerating growth in critical national security missions and strengthening its position as a provider of high-end, digitally-enabled solutions as well as technologies in attractive end markets. 

Inside the Headline Numbers

Adjusted earnings of 51 cents per share surpassed the consensus estimate of 48 cents by 6.3%. The reported figure increased 10.9% from 46 cents per share reported a year ago.

Total revenues improved 1% year over year to $1,466 million. However, the top line missed the consensus estimate of $1,509 million by 2.8%.

Adjusted EBITDA increased 15.4% year over year to $135 million in the quarter. Adjusted EBITDA margin improved 110 bps (basis points) on year over year to 9.2%.

KBR, Inc. Price, Consensus and EPS Surprise

 

KBR, Inc. Price, Consensus and EPS Surprise

KBR, Inc. price-consensus-eps-surprise-chart | KBR, Inc. Quote

Segmental Details

Revenues in the Government Solutions segment inched up 14.4% year over year to $1,074 million. The upside is attributable to solid space and defense systems engineering businesses. Adjusted EBITDA margin of 9.3% contracted 160 bps year over year.

Technology Solutions' revenues decreased 23.7% year over year to $71 million due to higher concentration of license mix. That said, adjusted EBITDA margin contracted to 26.8% from 31.2% a year ago.

Energy Solutions' revenues decreased 23.6% year over year to $321 million. That said, adjusted EBITDA margin of 5.3% increased 220 bps from the year-ago level on cost-control measures.

Backlog

As of Dec 31, 2020, total backlog came in at $15.12 billion compared with $14.64 billion at 2019-end. Of the total backlog, Government Solutions booked $12.53 billion. Technology Solutions and Energy Solutions segments accounted for $704 million and $1.89 billion of the total backlog, respectively.

Government and Technology Solution units had a book-to-bill ratio of 1.2 and 1.4, respectively, excluding the impact of long-term privately-financed initiatives or PFIs.

Financials

As of Dec 31, 2020, KBR’s cash and cash equivalents were $436 million, down from $712 million at 2019-end. Long-term debt was $1.58 billion versus $1.18 billion at 2019-end.

For 2020, cash provided by operating activities totaled $367 million compared with $256 million in 2019. Adjusted operating cash flow was $290 million, up from $256 million a year ago.

2020 Highlights

Total revenues in 2020 came in at $5,767 million compared with $5,639 million in 2019, showing a 2.3% increase.

Adjusted EBITDA increased 1.5% to $478 million in 2020, mainly on revenue growth.

Earnings per share grew 2.4% year over year to $1.73.

2021 Guidance

For 2021, the company expects total revenues in the range of $5.8-$6.2 billion and an adjusted EBITDA margin of 9%. Also, it expects effective tax rate between 25% and 26% and adjusted earnings per share in the band of $2.00-$2.20.

Meanwhile, operating cash flow is projected in the range of $250-$290 million, while adjusted operating cash flow is estimated between $280 million and $320 million.

Meanwhile, for 2021, KBR updated the names of its businesses to Government Solutions (that comprises four business units, namely, Defense & Intel, Science & Space, and Readiness & Sustainment), and Sustainable Technology Solutions (formerly called Technology Solutions) to better reflect its business portfolio of advanced technologies.

Zacks Rank

KBR — which shares space with AECOM (ACM - Free Report) and Jacobs Engineering Group Inc. (J - Free Report) and Quanta Services Inc. (PWR - Free Report) in the Zacks  Engineering - R and D Services industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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