KBR, Inc. (KBR - Free Report) has secured a contract from GS Caltex Corp. to supply its proprietary Selective Cracking Optimum Recovery (SCORE) Ethylene Technology.
Per the contract, KBR will supply its advanced SCORE technology license and basic engineering design services for GS Caltex’s 700 KTA ethylene mixed feed cracker. GS Caltex, a company owned by GS Energy and U.S.-based Chevron Corp. (CVX - Free Report) , will build the new plant and use naphtha, liquefied petroleum gas and refinery off-gases as its main feedstocks.
The project, to be built in the South Korean southern city of Yeosu, will use KBR's highly selective SC-1 furnaces for the highest yield and flexibility.
KBR is the leading olefin plant designer, and construction and technology developer. The company’s SCORE technology is highly flexible, and enables producers to boost the bottom line through superior yield, energy, and operational performance.
With the help of KBR's cost-effective cracking technologies and flexible plant designs, 20 new ethylene plants, with a combined capacity of 13 million metric tons per year, have been brought on-stream since 1990.
Selective opportunities in the downstream petrochemical and ethylene projects, and a growing number of small-scale LNG projects in North America are expected to boost the growth of hydrocarbons. The company believes that a healthy balance between hydrocarbons and the government projects positions it markedly for future growth.
Notably, Hydrocarbons Services revenues declined 40.1% year over year in the first quarter of 2018. Reduced activity on several projects across the sector dented the segment’s prospects. The recent contract is expected to enable the company offset the downward trend and boost revenues. Nonetheless, KBR is optimistic about backlog growth through 2018, primarily owing to work in consulting areas.
Late last month, KBR secured a contract from DuPont Safety & Construction — a business unit of DowDuPont Specialty Products Division — to expand the production capacity of Tyvek nonwoven materials. Estimated revenues associated with this contract will be booked into the backlog of unfilled orders for KBR's Hydrocarbons Services Business Segment in the second half of 2018. These contracts are expected to aid the company offset the weak top-line scenario of KBR's Hydrocarbons Services business segment.
Year to date, KBR’s shares have declined 10.4% compared with the industry’s decline of 17.1%. Going forward, KBR expects broad-based growth in all the segments, which is expected to reflect in its share price. Primary growth drivers of the company include high-end and differentiated government services work, strong margin performance, as well as technology and consulting.
Zacks Rank & Stocks to Consider
Currently, KBR carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector are Jacobs Engineering Group Inc. (JEC - Free Report) and Altair Engineering Inc. (ALTR - Free Report) . While Jacobs sports a Zacks Rank #1 (Strong Buy), Altair Engineering carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Jacobs and Altair Engineering’s current-year earnings are expected to grow 31.5% and 3.9%, respectively.
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