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Mission Possible: KBR's Spin-Off Fuels Twin Growth Stories

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Key Takeaways

  • KBR plans a tax-free spin-off of its MTS segment by mid-to-late 2026, forming two pure-play firms.
  • New KBR will focus on energy transition, proprietary tech, and strong free cash flow generation.
  • SpinCo will target national security and space tech, leveraging long-term contracts and strong demand.

KBR, Inc. (KBR - Free Report) has announced a tax-free spin-off of its Mission Technology Solutions (MTS) segment, which is expected to be complete by mid-to-late 2026.

Upon the final approval of its board of directors and satisfying all the customary conditions, there will be the formation of two pure-play companies, New KBR, comprising the Sustainable Technology Solutions (STS) segment, and SpinCo, comprising the MTS segment.

KBR stock moved up 3.5% during yesterday’s trading hours and continued the trend by growing 3.7% in the after-hours.

Digging Deeper Into KBR’s Spin-Off Move

By leveraging its expertise across a diverse range of more than 85 process technologies, New KBR is expected to deliver proprietary, IP-protected process technologies, primarily focused on reducing emissions, increasing efficiency and advancing the energy transition. This business is expected to continue offering synergistic advisory and consulting services, as well as high-end, digitally enabled engineering, design and program management across the asset lifecycle to its global customers.

Moreover, the management believes that New KBR will benefit from its low capital intensity and have access to diversified revenue streams, alongside generating robust free cash flow with high conversion rates.

On the other hand, SpinCo is expected to realize benefits from its business alignment across national security demand and space technology priorities, given the increased public spending trends. Through a capital light model, long-duration contract opportunities with risk-free cash flow expectations and a strong market position due to increased customer engagement and deep domain expertise, SpinCo is expected to continue benefiting after the spin-off and boost its backlog.

Will the Spin-Off Benefit KBR?

Per KBR’s management, after the spin-off, the two independent companies are expected to deliver long-term profitable growth and value for their customers, associates and shareholders through distinct product and service offerings.

Besides, each company is likely to gain benefits from strategic and management focus, organizational agility and streamlined decision making, increased focus on end markets, prioritized commercial resources and sharpened go-to-market approaches, increased capital allocation flexibility to support strategic imperatives, like potential M&A transactions, and distinct and compelling investment profiles.

Per Stuart Bradie, KBR’s chair, president and chief executive officer, “After the spin-off, we expect both companies to retain key elements of KBR’s unique values-driven culture and proven execution approach, providing a strong foundation for future profitable growth and returns.”

KBR Stock’s Price Performance

KBR’s shares have inched up 0.9% in the past three months, underperforming the Zacks Engineering - R and D Services industry, the broader Zacks Construction sector and the S&P 500 index.

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The company’s prospects are pulling back to some extent due to the high-cost scenario and ongoing macro risks. Moreover, the sudden HomeSafe Alliance JV termination on June 18, 2025, marred investors' sentiments. Nonetheless, with the ongoing restructuring efforts, KBR is expected to jump back on track in gaining from market tailwinds and defying the risks in the long term.

KBR’s Zacks Rank & Key Picks

KBR currently carries a Zacks Rank #3 (Hold).

Here are some better-ranked stocks from the same sector.

Tutor Perini Corporation (TPC - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company delivered a trailing four-quarter earnings surprise of 387.2%, on average. The stock has gained 40.8% in the past three months. The Zacks Consensus Estimate for Tutor Perini’s 2025 sales and earnings per share (EPS) implies an increase of 21.2% and 220.8%, respectively, from a year ago.

Primoris Services Corporation (PRIM - Free Report) currently sports a Zacks Rank of 1. The company delivered a trailing four-quarter earnings surprise of 44.5%, on average. The stock has surged 64.5% in the past three months.

The Zacks Consensus Estimate for Primoris’ 2025 sales and EPS implies an increase of 7.9% and 24.8%, respectively, from a year ago.

Great Lakes Dredge & Dock Corporation (GLDD - Free Report) presently sports a Zacks Rank of 1. The company delivered a trailing four-quarter earnings surprise of 45.3%, on average. The stock has inched down 0.8% in the past three months. 

The Zacks Consensus Estimate for Great Lakes Dredge & Dock’s 2025 sales and EPS implies an increase of 9% and 21.4%, respectively, from a year ago.

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