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KBR Acquires Isomerization Technologies From RRT Global

Zacks Equity Research

In order to offer more octane and clean fuel technology solutions to customers, KBR, Inc. KBR recently announced the acquisition of RRT Global’s isomerization technologies.

Since 2015, KBR — together with RRT Global — has been providing MAX-ISOM catalytic distillation technology for the isomerization of C5 and C6 n-paraffins for the enhancement of gasoline pool octane. The MAX-ISOM technology allows low-cost production of high-octane isomerate in a highly flexible and compact design, with minimum energy requirements. The isomerization of C5 and C6 streams is practiced to enhance the octane rating of light straight run naphtha.

Importantly, isomerization provides refiners with a high-octane gasoline blend stock that is free from benzene, aromatics, oxygenates and olefins. Notably, the deal will now allow KBR’s Technology Solutions business to offer isomerization technologies for C4, C5, C6 and C7 streams in refineries.

KBR has a penchant for acquisitions and strategic alliances to bolster inorganic growth and expand market share. The company’s Technology Solutions segment has been performing well in recent times, driven by refining and petrochemicals projects in China, India and Africa, as well as strong technologies demand.

Recently, it reported strong second-quarter 2019 results, buoyed by continued solid organic growth in Government Services and Technology businesses. In the quarter, the technology unit recorded 29.2% growth in quarterly revenues. This improvement was attributable to solid demand for KBR’s innovative solutions that grew across chemical, petrochemical and refining markets. Also, higher proprietary equipment sales contributed to the upside.

The company expects thriving global technology opportunities — led by ammonia, refining and olefins projects — to persist. Notably, backlog from the said segment as of Jun 30, 2019 was $500 million, with second-quarter book-to-bill ratio of 1.5, excluding the workoff of its long-term private finance initiatives, or PFIs.

Price Performance

Shares of the company have broadly outperformed its industry and the S&P 500 composite so far this year. The stock has gained 68.5% compared with the industry and S&P 500’s growth of 13.9% and 15.9%, respectively. Estimates for 2019 have moved 0.6% upward over the past 30 days, reflecting analysts’ optimism surrounding KBR’s earnings growth potential.

The price performance was mainly backed by solid earnings surprise history, having surpassed the Zacks Consensus Estimate in eight of the trailing nine quarters. The contract winning spree underscores KBR's proven ability to safely and efficiently deliver projects in operating facilities.

Zacks Rank

KBR, which shares space with AECOM ACM, Jacobs Engineering Group Inc. JEC and Altair Engineering Inc. ALTR in the Zacks Engineering - R and D Services industry, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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