It has been about a month since the last earnings report for KBR Inc. (
KBR Quick Quote KBR - Free Report) . Shares have lost about 0.4% 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 Q1 Earnings & Revenues Beat Estimates, Backlog Strong
KBR reported strong results in first-quarter 2023, wherein earnings and revenues surpassed the Zacks Consensus Estimate and increased on a year-over-year basis. The company’s top and bottom lines gained on strong underlying growth and margin expansion as well as excellent bookings in the reported quarter.
Stuart Bradie, KBR’s president and CEO, said, “Of particular note in the quarter is that our bookings were in strategic areas across our portfolio – energy security, national security, defense modernization, space and sustainability. We are thus well-positioned to continue to deliver growth and value for our stakeholders.” Inside the Headline Numbers
Adjusted earnings of 67 cents per share surpassed the consensus estimate of 58 cents by 15.5% and increased 8.1% from 62 cents reported a year ago. The adjusted earnings increased by 22%, excluding Operation Allies Welcome (OAW).
Total revenues inched up 0.6% year over year to $1.7 billion and topped the consensus mark of $1.62 billion by 4.9%. The downside was mainly due to the completion of work related to the Operations Allies Welcome program in early 2022, which commenced in third-quarter 2021. Revenues increased by 18%, excluding OAW. Adjusted EBITDA increased 18.2% year over year to $182 million in the quarter. Adjusted EBITDA margin was up 170 basis points to 11%. Segmental & Backlog Details
Revenues in the
Government Solutions or GS segment decreased 9% year over year to $1,328 million. The downside was backed by decreased activity in Readiness & Sustainment, Defense and International partially offset by increased activity in Science & Space. Adjusted EBITDA fell to $132 million from $143 million and adjusted EBITDA margin of 10% was at with the prior year. Sustainable Technology Solutions' (STS) revenues rose 47% year over year to $375 million, driven by both increased sustainable services and technology. Adjusted EBITDA increased a whopping 91% year over year to $82 million and adjusted EBITDA margin was up 500 basis points to 22%. This was attributable to a favorable revenue mix, the achievement of certain licensing milestones and the acceleration of certain project closeouts. As of Mar 31, 2023, the total backlog (including award options) was $20.89 billion compared with $19.76 billion at 2021-end. Of the total backlog, Government Solutions booked $16 billion. The Sustainable Technology Solutions segment accounted for $4.9 billion of the total backlog. At the first quarter’s end, the company delivered book-to-bill of 1.4x and recorded $3.1 billion in bookings and options. Liquidity & Cash Flow
As of Mar 31, 2023, KBR’s cash and cash equivalents were $416 million, up from $389 million at 2022-end. Long-term debt was $1,374 million at March 2023-end, down from $1,376 million at 2022-end.
In the first three months of 2023, cash provided by operating activities totaled $35 million, down from $89 million in the year-ago period. It had an adjusted free cash flow of $16 million, significantly down from $83 million a year ago. 2023 Guidance
KBR expects total revenues in the range of $6.9-$7.1 billion and an adjusted EBITDA between $715 and $745 million. Also, it expects an effective tax rate between 24% and 25% and adjusted earnings per share in the band of $2.76-$2.96. Adjusted operating cash flow is projected in the range of $425-$460 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
Currently, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, KBR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.