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KBR Wins Security Systems Maintenance Contract from FAA

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KBR Inc. (KBR - Free Report) recently announced that its global Government Service business, KBRwyle, has secured a $52 million deal from Federal Aviation Administration (FAA). Revenues related with the project will be booked as unfilled orders in KBR’s Government Services business segment’s backlog.

The Deal

Per the contract, KBRwyle will offer the maintenance services for the security systems and equipment of over 500 FAA sites all over the United Statesthat would safeguard the U.S. national air space. The company will offer the services over the next five years, consequentlyextending its offering of similar services to the FAA since 2011.

Other Major Contracts

KBR has been on an award-winning spree in recent times. Some notable contracts secured recently include an engineering and project management services contract by JVGAS, a base operating support services deal from the Naval Facilities Engineering Command (NAVFAC) Atlantic, and another contract worth $441 million for base operations support services by NAVFAC Atlantic. Such contract wins bode well for the company’s growth.

Existing Business Scenario

Currently, KBR is banking on the strength of its Government Services businesses to optimizegrowth potential. The company remains bullish about prospects of this particular business, which is driven primarily by lucrative contracts from the U.S. military and work from the UK Ministry of Defense. This apart, the company anticipates growth across all its key markets in the United States, the UK and Australia, backed by continued opportunities across the life-cycle of projects.

However, it seems that uncertain global political and economical conditions are likely to affect the Zacks Rank #4 (Sell) company’s performance. Current volatility in the oil and gas markets, along with oversupply which is straining prices and spending levels, will hurt the company’s projects and orders. Further, it has suffered lately due to these factors. Not surprisingly,the company’s stock has yielded an average return of 13.8% in the past one year, underperforming the industry’s average gain of 27.4%.

Moreover, uncertainties related to Brexit may impact the company as its Government Services business in the UK has a 20-year contract with the Ministry of Defense. This apart, reduced capital expenditure by key clients and currency fluctuationshave been putting immense pressure on the company’s backlog.

Stocks to Consider

Some better-ranked stocks in the same space include TopBuild Corp. (BLD - Free Report) , Thor Industries, Inc. (THO - Free Report) and Owens Corning Inc (OC - Free Report) . While TopBuild and Thor Industries sport a Zacks Rank #1 (Strong Buy), Owens Corning carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

TopBuild has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 10.4%.

Thor Industries has outpaced estimates thrice in the preceding four quarters, with an average earnings surprise of 11.9%.

Owens Corning has outpaced estimates in the preceding four quarters, with an average earnings surprise of 20.2%.

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