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KBR Arm Wins Cyber & Engineering Services Military Contracts

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KBRwyle, a global government services unit of KBR, Inc. (KBR - Free Report) , has received three contracts from the U.S. Air Force Installation Contracting Agency to provide cybersecurity and engineering services for the military.

These task orders, with a total value of $95.7 million, demonstrate KBR’s position as a leading provider of innovative cyber and electronic security solutions.

Task Orders

The contract of highest value, worth $41.9 million, is a cybersecurity task order that will help customers of the U.S. Air Force and defence department to better understand data analysis results and make more informed decisions. The work under this contract will be performed primarily at Wright-Patterson Air Force Base in Dayton, OH over the next five years.

The second one involves KBRwyle providing information technology and cybersecurity services for the U.S. Navy's Naval Air Systems Command and Naval Air Warfare Center Aircraft Division activities. This contract is worth $35.3 million. This work will mainly be carried out at Naval Air Station Patuxent River in Lexington Park, MD over a three-year period.

Lastly, per the $18.5 million task order, KBRwyle will provide engineering services, including cybersecurity, obsolescence management, reverse engineering, and ground vehicle power and mobility. The work will be performed in Sterling Heights and Warren, MI over a 45-month period.

Our Take

Shares of KBR have gained 21.5% over the past three months, outperforming its industry’s rally of 19.8%. The performance of its Government Services or GS business is exceeding the market expectations, which is adding to KBR’s strength.

The GS segment, accounting for more than 72% of the total revenues, has been performing well. Presently, the company is banking on the strength of its GS business to optimize its growth potential.

The GS segment recorded 78% revenue growth in 2018. Its organic revenue growth of 17% was driven by on-contract growth in logistics and engineering, take-away wins, alongside new work awarded under the company’s portfolio of well-positioned contracting vehicles.

Notably, more than 80% of KBR’s total backlog represents work in the GS. Majority of the services provided by this segment are long-term reimbursable service annuity-type contracts that have significantly lower risks than some other projects. The company believes that this will ultimately help in margin expansion and de-risking of business considerably. KBR’s backlog level was $13.5 billion (as of Dec 31, 2018) compared with $10.6 billion a year ago.

Zacks Rank & Stocks to Consider

Currently, KBR carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the Zacks Construction sector are Apergy Corporation APY, Quanta Services, Inc. PWR and Great Lakes Dredge & Dock Corporation GLDD, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Apergy has an expected long-term earnings growth rate of 22.5%.

Quanta Services has an earnings growth rate of 25.3% for 2019.

Great Lakes has an expected earnings growth rate of 170.6% for 2019.

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