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KBR Secures Seat on $6.4B IDIQ Contract From US Air Force

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KBR Inc. (KBR - Free Report) has received a contract from the U.S. Air Force for worldwide contingency and humanitarian support. This multiple-award Air Force Contract Augmentation Program V (AFCAP V) contract has a maximum ceiling value of $6.4 billion and an eight-year performance period.

Per this indefinite-delivery, indefinite-quantity (IDIQ) contract, KBR has the opportunity to compete on task orders to provide a full range of support to the U.S. government. These services include assisting with contingency planning, deploying, training and equipping of U.S. military forces; emergency and contingency construction; as well as logistics and commodities.

KBR has held a seat on predecessor contracts, AFCAP III and IV, since 2005. The company has been providing the U.S. Air Force for critical services through various AFCAP contracts. It had provided recovery efforts at the Tyndall Air Force Base, after Hurricane Michael devastated the same in 2018.

"When the U.S. government faces unexpected circumstances, KBR has the ability to quickly and adeptly meet challenges head-on anywhere in the world," said Byron Bright, KBR’s Government Solutions U.S. president.

Solid Contribution From Government Solutions Business Bodes Well

The performance of the Government Solutions business is exceeding market expectation, which is adding to KBR’s bliss. The segment, which has been delivering industry-leading organic revenue growth for quite some time now, currently contributes 69.6% to the company’s total revenues. Organically, sales from the Government Solutions business recorded 14% growth in 2019, 9% of which was organic.

The solid performance was pinned by on-contract growth in logistics and engineering, take-away wins, alongside new work awarded under its portfolio of well-positioned contracting vehicles. Ongoing growth in KBR’s overseas logistics and mission support programs driven by higher military exercise activities, increased outsourcing of sustainment activities by the military and the ramp up of the new wins led to the growth.

Higher tasking for various missile defense and other military priorities in its engineering business areas, under select IDIQ contracts, also led to the upside.

Owing to solid performance across businesses, shares of KBR have outperformed the Zacks Engineering - R And D Services industry in a year’s time. Notably, the company is banking on strength of the Government Solutions business to optimize growth potential. Also, steady growth in backlog is adding to KBR’s bliss. The company’s solid backlog level of $14.64 billion (as of Dec 31, 2019) compared with $13.5 billion at 2018-end highlights its underlying strength. Nearly 75% of the backlog represents work in Government Solutions.

Zacks Rank

KBR — which shares space with Gates Industrial Corporation plc (GTES - Free Report) , Quanta Services, Inc. (PWR - Free Report) and AECOM (ACM - Free Report) in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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