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KBR Gains 17.5% in the Past 3 Months: Will the Rally Continue?
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KBR, Inc. (KBR - Free Report) is rallying recently on the back of strong momentum in attractive end markets. The stock has gained 17.5% in the past three months versus the Zacks Engineering - R and D Services industry’s 1.1% decline.
The company has been benefiting from broad-based growth across its business segments, courtesy of its high-end and differentiated government business work, strong margin performance, and technology and consulting services. The increasing platform of long-term, buoyant, mission-critical programs provides strong visibility in volatile times.
This engineering, construction and services firm’s determination to lower emissions, product diversification, energy efficiency, and more sustainable technologies and solutions have been driving its performance.
Let’s delve deeper into the factors substantiating its growth trajectory.
Solid Government Solutions Business: The company’s Government Solutions unit (accounting for almost 84% of revenues) has been performing well, courtesy of on-contract growth in logistics and engineering, take-away wins along with new work awarded under the company’s portfolio of well-positioned contracting vehicles and increased outsourcing of sustainment activities by the military. KBR is a leader in advancing air, space, cyber and missile defense systems for the U.S. military.
KBR expects growth across all its key markets in the United States, the U.K. and Australia, driven by continued opportunities across the lifecycle of projects. Revenues in the Government Solutions segment increased 6.6% year over year in second-quarter 2022. This business booked $11.68 billion of backlog in the second quarter end, suggesting strong visibility.
Robust Technology Support: For more than five decades, KBR has been leading the process technology development, commercialization and the plant design solutions industry. Its best-in-class technologies have been designing and building end-to-end sophisticated digitization solutions and services for clients worldwide. Overall, it has been driving growth by focusing on lowering carbon emissions, product diversification, energy efficiency, and more sustainable technologies and solutions.
These digitized technologies and solutions help companies increase efficiency and productivity, reduce costs and create opportunities to generate higher revenues and profitability. Although second-quarter revenues slipped marginally, it booked a $3.71-billion backlog at quarter end. The segment benefited from strong end markets, superior technology offerings and highly sought-after engineering solutions. Also, acceleration of certain project closeouts and other timing items and a $16-million benefit associated with the settlement of a subcontractor dispute drove margins by 160 bps in the second quarter.
Bolt-on Acquisition: KBR has a penchant for acquisitions and strategic alliances to bolster its inorganic growth and expand market share. Recently, KBR has agreed to acquire a UK-based digital transformation company, VIMA Group, for up to £75 million. This addition would strengthen KBR’s offerings in digital and information technology services for defense sector clients. VIMA Group offers solutions across a number of large-scale, high-priority digital transformation programs to support its clients, including defense and other public sector firms. It ensures the availability of effective digital and information technology services as guided by the U.K.'s Digital Strategy for Defence.
The company’s adjusted EBITDA increased 19.2% year over year in the second quarter, driven by a strong performance of the Government Solutions business, acquisitions and solid project execution.
Some Better-Ranked Stock in the Construction Sector
EMCOR Group (EME - Free Report) , a Zacks Rank #2 company, has been benefiting from double-digit growth across the U.S. segments, resilient end markets, solid RPOs and bolt-on acquisitions.
The consensus mark for EME’s 2022 earnings rose to $7.73 per share from $7.66 in the past 30 days. This suggests 9.5% year-over-year growth.
United Rentals, Inc. (URI - Free Report) , a Zacks Rank #2 company, has been benefiting from a broad-based recovery of activity across end markets served. Also, higher margins from rental revenues and used equipment sales are added benefits.
The consensus mark for URI’s 2022 earnings rose to $31.03 per share from $29.43 in the past 30 days. This suggests 40.7% year-over-year growth.
UFP Industries, Inc. (UFPI - Free Report) , a Zacks Rank #2 company, has been benefiting from the diversity of markets, higher organic unit sales, solid contributions from buyouts, new product innovation and an improved pricing model.
The consensus mark for UFPI’s 2022 earnings rose to $10.56 per share from $9.15 in the past 30 days. This suggests 22.9% year-over-year growth.
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KBR Gains 17.5% in the Past 3 Months: Will the Rally Continue?
KBR, Inc. (KBR - Free Report) is rallying recently on the back of strong momentum in attractive end markets. The stock has gained 17.5% in the past three months versus the Zacks Engineering - R and D Services industry’s 1.1% decline.
The company has been benefiting from broad-based growth across its business segments, courtesy of its high-end and differentiated government business work, strong margin performance, and technology and consulting services. The increasing platform of long-term, buoyant, mission-critical programs provides strong visibility in volatile times.
This engineering, construction and services firm’s determination to lower emissions, product diversification, energy efficiency, and more sustainable technologies and solutions have been driving its performance.
Image Source: Zacks Investment Research
The 2022 earnings estimate for this Zacks Rank #3 (Hold) company moved upward to $2.62 per share from $2.61 in the past 30 days. This positive trend reflects bullish analyst sentiment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s delve deeper into the factors substantiating its growth trajectory.
Solid Government Solutions Business: The company’s Government Solutions unit (accounting for almost 84% of revenues) has been performing well, courtesy of on-contract growth in logistics and engineering, take-away wins along with new work awarded under the company’s portfolio of well-positioned contracting vehicles and increased outsourcing of sustainment activities by the military. KBR is a leader in advancing air, space, cyber and missile defense systems for the U.S. military.
KBR expects growth across all its key markets in the United States, the U.K. and Australia, driven by continued opportunities across the lifecycle of projects. Revenues in the Government Solutions segment increased 6.6% year over year in second-quarter 2022. This business booked $11.68 billion of backlog in the second quarter end, suggesting strong visibility.
Robust Technology Support: For more than five decades, KBR has been leading the process technology development, commercialization and the plant design solutions industry. Its best-in-class technologies have been designing and building end-to-end sophisticated digitization solutions and services for clients worldwide. Overall, it has been driving growth by focusing on lowering carbon emissions, product diversification, energy efficiency, and more sustainable technologies and solutions.
These digitized technologies and solutions help companies increase efficiency and productivity, reduce costs and create opportunities to generate higher revenues and profitability. Although second-quarter revenues slipped marginally, it booked a $3.71-billion backlog at quarter end. The segment benefited from strong end markets, superior technology offerings and highly sought-after engineering solutions. Also, acceleration of certain project closeouts and other timing items and a $16-million benefit associated with the settlement of a subcontractor dispute drove margins by 160 bps in the second quarter.
Bolt-on Acquisition: KBR has a penchant for acquisitions and strategic alliances to bolster its inorganic growth and expand market share. Recently, KBR has agreed to acquire a UK-based digital transformation company, VIMA Group, for up to £75 million. This addition would strengthen KBR’s offerings in digital and information technology services for defense sector clients. VIMA Group offers solutions across a number of large-scale, high-priority digital transformation programs to support its clients, including defense and other public sector firms. It ensures the availability of effective digital and information technology services as guided by the U.K.'s Digital Strategy for Defence.
The company’s adjusted EBITDA increased 19.2% year over year in the second quarter, driven by a strong performance of the Government Solutions business, acquisitions and solid project execution.
Some Better-Ranked Stock in the Construction Sector
EMCOR Group (EME - Free Report) , a Zacks Rank #2 company, has been benefiting from double-digit growth across the U.S. segments, resilient end markets, solid RPOs and bolt-on acquisitions.
The consensus mark for EME’s 2022 earnings rose to $7.73 per share from $7.66 in the past 30 days. This suggests 9.5% year-over-year growth.
United Rentals, Inc. (URI - Free Report) , a Zacks Rank #2 company, has been benefiting from a broad-based recovery of activity across end markets served. Also, higher margins from rental revenues and used equipment sales are added benefits.
The consensus mark for URI’s 2022 earnings rose to $31.03 per share from $29.43 in the past 30 days. This suggests 40.7% year-over-year growth.
UFP Industries, Inc. (UFPI - Free Report) , a Zacks Rank #2 company, has been benefiting from the diversity of markets, higher organic unit sales, solid contributions from buyouts, new product innovation and an improved pricing model.
The consensus mark for UFPI’s 2022 earnings rose to $10.56 per share from $9.15 in the past 30 days. This suggests 22.9% year-over-year growth.