KBR Earnings Surpasses Estimates

Zacks

KBR Inc.(KBR)recently reported first quarter 2013 results with earnings of 59 cents a share beating the Zacks Consensus Estimate of 47 cents by 28.6%. However, quarterly earnings were down 3.3% year over year. Profits in the current quarter were impacted by five problem projects that the company is executing since the past quarter.  

Revenue

Revenues in the first quarter of 2013 were $1.9 billion compared to $2.0 billion in the first quarter of 2012. Top line was impacted by declines in the IGP business group. In addition, the decrease was also due to lower project activity and project completions on the Escravos, Skikda and Pearl GTL projects.

Segment Details

Revenues in theHydrocarbons segment were down 15% year over year to $947 million. The job income of the segment was up 32% year over year, driven by growth across the business. Backlog during the quarter was $8.6 billion, down 4.6% due to lower number of projects in Oil & Gas, Downstream and Technology.

Infrastructure, Government and Power(:IGP) segment revenue in the quarter declined 21% year over year to $407 million. In addition, the job income from the segment also contracted 16% during the reported quarter. Backlog at the end of the quarter was $2.5 billion, down 10.3%, due to lesser number of projects across the business.

Servicessegment reported 39% growth in revenue during the quarter to $485 million, while job income was up 11%. The increase in job income was primarily driven by several new module fabrication and turnaround projects ramping in Canada. Backlog in the services segment grew 2.1%.  

Margins and Balance Sheet

Operating income in the first quarter of 2013 was $133 million compared to $112 million in the prior-year quarter. Operating margin for the quarter grew 155 basis points to 7.15%, driven by higher job income, which was partially offset by higher labor cost.

Exiting the quarter, cash and cash equivalents were $904 million compared to $1.1 billion as of Dec 31, 2012. During the quarter, the company had shareholders’ equity of $2.6 billion.

Net cash flow from operating activities was negative $93 million compared to negative $107 million in the prior-year quarter.  

Outlook

Concurrent with the earnings release, the company reaffirmed its guidance in the range of $2.45 to $2.90 a share.

KBR currently has a Zacks Rank #3 (Hold). However, some other players operating in the same industry, which can be considered at the moment are Fluor Corporation (FLR), which has a Zacks Rank #1 (Strong Buy) and AECOM Technology Corporation (ACM) and Jacobs Engineering Group, Inc. (JEC), both having a Zacks Rank #2 (Buy).  

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