KBR, Inc.’s (KBR - Free Report) government services unit, KBRwyle has received a firm-fixed-price, cost-plus-fixed fee, indefinite-delivery/indefinite-quantity (“IDIQ”) contract from the U.S. Department of Defense (DoD) for U.S. Marine Corps prepositioning program logistics services in support of Blount Island Command.
The contract is valued at $530.4 million and has options, which, if exercised, would bring its cumulative value to $949.4 million.
The contract requires KBRwyle to provide a full range of logistics support services that include equipment maintenance and materiel management in support of the Marine Corps Prepositioning Program, and deployed forces worldwide. Majority of the contract work (83%) will be performed in Jacksonville, FL and is expected to be completed by May 2024.
KBR’s Government Services Unit Poses Strength
KBR’s Government Solutions unit focuses exclusively on long-term service contracts with annuity streams for the United Kingdom, Australian and U.S. governments.
This segment — accounting for more than 72% of its total revenues — has been performing well. Presently, KBR is banking on strength of the said segment to optimize growth potential.
Notably, the segment recorded 44% revenue growth in the first quarter. Again, Government Solutions business sales recorded 22% organic growth in the first quarter of 2019, following a 31% increase in fourth-quarter 2018. Its industry-leading organic revenue growth was underpinned 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.
Ongoing growth in KBR’s overseas logistics and mission support programs was driven by higher military exercise activities, increased outsourcing of sustainment activities by the military and the ramp up of new wins. Moreover, higher tasking for various missile defense and other military priorities in its engineering business areas, under select IDIQ contracts, led to the upside.
Notably, shares of KBR have gained 43.5% year to date, broadly outperforming the industry’s 14% average growth. The contract winning spree underscores KBR's proven ability to safely and efficiently deliver projects in operating facilities.
Zacks Rank & Key Picks
Currently, KBR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Construction sector include AECOM (ACM - Free Report) , Quanta Services, Inc. (PWR - Free Report) and Altair Engineering Inc. (ALTR - Free Report) , each carrying a Zacks Rank #2 (Buy).
AECOM has a solid earnings surprise history, having surpassed the consensus mark in all the trailing four quarters, with the average being 6.2%.
Quanta Services and Altair Engineering’s earnings for the current year are expected to increase 29.5% and 53.7%, respectively.
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