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KBR Q2 Earnings and Revenues Beat Estimates, Guidance Up

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KBR, Inc. (KBR - Free Report) reported adjusted earnings of 34 cents per share in second-quarter 2018, beating the Zacks Consensus Estimate of 33 cents by 3%.

Notably, the company’s shares increased 3.4% at the close of market on Jul 30, following its earnings release.

However, the bottom line decreased 40% year over year from 57 cents per share a year ago.

The company’s revenues were $1,267 million, up 16% year over year. Consolidation of acquired entities in the Aspire Defence program, strong organic growth of 11% in the Government Services business segment and the acquisition of SGT resulted in double-digit growth in its top line. Also, the reported figure surpassed the consensus mark of $1,189 million.

Segment Data

Government Services revenues rose an impressive 59.8% year over year to $868 million. The uptrend was mainly driven by 11% organic growth in the business, along with accretive revenues from the acquisition of SGT, and consolidation of Aspire.

Also, Technology revenues recorded an increase of 2.9% year over year to $72 million. The increase was attributable to strong demand for gas monetization technologies across petrochemical, ammonia and refining markets.

However, Hydrocarbons Services revenues were down 31% year over year to $327 million.

As of Jun 30, 2018, the company’s total backlog was $13.5 billion compared with $13.2 billion on Mar 31 and $10.6 billion as of Dec 31, 2017. Of the total backlog, about $10.8 billion is booked under the Government Services segment (up 37.4% on a year-over-year basis) and around $2.1 billion under the Hydrocarbons Services segment (up 0.3% year over year). While Technology accounted for $509 million of the backlog (up 74.3% on a year-over-year basis), Non-strategic Business totaled $4 million in backlog (down 42.9%).

Major Contract Wins

In the quarter under review, KBR clinched some prestigious awards in its Government Services and Hydrocarbons Services segment. These include a $133-million task order by the U.S. Army to provide technical and engineering services to the PATRIOT missile system and $900 million IDIQ contract for providing solutions under the Department of Defense's Joint Test and Evaluation Program. Under Hydrocarbon Services, KBR received a multi-year contract to provide engineering, procurement and construction management services to a fortune 100 chemicals manufacturer in the United States and Mexico.

KBR, Inc. Price, Consensus and EPS Surprise
 

Liquidity & Cash Flow

As of Jun 30, 2018, KBR’s cash and equivalents were $519 million, up from $439 million at the end of 2017.

In the quarter, cash flow provided by operating activities totaled $94 million, much lower than $325 million in the year-ago quarter.

2018 Guidance

KBR increased its full-year 2018 outlook. The company currently expects adjusted earnings per share in the band of $1.45-$1.50 from $1.35-$1.45 expected earlier.

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

Zacks Rank & Other Stocks to Consider

KBR currently has a Zacks Rank #2 (Buy).

Other top-ranked stocks in the Zacks Construction sector include Jacobs Engineering Group Inc. (JEC - Free Report) , Armstrong World Industries, Inc. (AWI - Free Report) and Foundation Building Materials, Inc. (FBM - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jacobs Engineering surpassed the consensus estimate on an average surprise rate of 12.34% in three of the trailing four quarters.

Foundation Building surpassed the consensus mark on an average surprise rate of 196.43% in all the trailing four quarters.

Armstrong World’s earnings per share is expected to increase 22.85% in 2018.

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