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Why Is KBR Up 3.8% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for KBR, Inc. (KBR - Free Report) . Shares have added about 3.8% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is KBR due for a pullback? 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 Q1 Earnings and Revenues Surpass Estimates

KBR reported adjusted earnings of 34 cents per share in first-quarter 2018, beating the Zacks Consensus Estimate of 25 cents by 36%.

The improvement in the company’s bottom line is attributable to strong performances at the company’s Government Services business segment as well as progress on the company’s Ichthys project.

Inside the Headlines

In the quarter under review, revenues were down 6.1% year over year to $ 1,038 million. Completion of various projects in the company’s Hydrocarbons Services segment resulted in decrease in the top line. However, the reported figure surpassed the consensus mark of $937 million.

Segment-wise, Government Services revenues rose an impressive 31.5% year over year to $677 million. The uptrend was mainly backed by new award wins from the U.K. Ministry of Defence, the U.S. Air Force and the Naval Air Warfare Center Aircraft Division.

However, Hydrocarbons Services revenues were down 40.1% year over year to $299 million. Reduced activity on several projects across the sector played spoilsport for the segment.

Also, Technology revenues recorded a decline of 6% year over year to $62 million.

KBR is changing the name of the Engineering & Construction segment to the Hydrocarbons Services segment. Moreover, the company has shifted the Consulting division, previously reported in the Technology and Consulting segment, to the Hydrocarbons Services segment. We believe that the company’s’ strategic restructuring activities and solid backlog levels should help it sail through difficult economic times and drive growth.

As of Mar 31, 2018, the company’s total backlog was $13.2 billion compared with $10.6 billion as of Dec 31, 2017. Of the total backlog, about $11.1 billion is booked under the Government Services segment (up 32.1% on a year-over-year basis) and around $1.6 billion under the Hydrocarbons Services segment (down 11.1% on a year-over-year basis). While Technology accounted for $423 million of the backlog (up 9.3% on a year-over-year basis), Non-strategic Business totaled $5 million in backlog (down 16.7%).

Major Contract Wins

In the quarter under review, KBR clinched some prestigious awards in its Government Services segment. These include a $42 million contract from the U.K. Ministry of Defence, a task order from the U.S. Air Force as well as an engineering and technical services contract from the Naval Air Warfare Center Aircraft Division.

Liquidity & Cash Flow

As of Mar 31, 2018, KBR’s cash and equivalents were $486 million, up from $410 million as of Mar 31, 2017.

For the quarter, cash flow used in operating activities totaled $130 million, up from cash use of $115 million in the year-ago quarter.

2018 Guidance

Concurrent with the earnings release, KBR provided full-year 2018 outlook. The company currently expects adjusted earnings per share in the band of $1.35-$1.45 per share.

This guidance excludes legal costs associated with legacy U.S. Government contracts and acquisition & integration-related expenses related with the Aspire and SGT acquisitions. The estimated legacy legal fees exclude any future cost reimbursement from U.S. Government.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.

KBR, Inc. Price and Consensus

KBR, Inc. Price and Consensus | KBR, Inc. Quote

VGM Scores

At this time, KBR has a poor Growth Score of F, however its Momentum is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for value based on our styles scores.

Outlook

KBR has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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