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KBR Downgraded to Strong Sell on Disappointing Q2 Results

Zacks Equity Research

On Aug 13, Zacks Investment Research downgraded KBR, Inc. (KBR) to a Zacks Rank #5 (Strong Sell) from Zacks Rank #4 (Sell) largely due to dismal second-quarter 2014 results.

Why the Downgrade?

KBR has been on a downtrend for the past few quarters. The company missed earnings in all the four trailing quarters. Further, it has witnessed strong downward estimate revisions after a lackluster second-quarter 2014 earnings release on Jul 31.

KBR reported a loss of 6 cents per share in the quarter, lagging both the Zacks Consensus Estimate of earnings of 26 cents and prior-year quarter earnings of 61 cents a share. The company’s revenues also declined 14.9% year over year to $1,659 million, lagging the Zacks Consensus Estimate of $1,682 million. Gross profit plunged 80% year over year to $28 million.

The results were impacted by the continued disappointing performance of KBR’s pipe fabrication and module assembly business based in Canada. The company also recorded revenue declines in 3 of the 4 reporting segments.

All these factors triggered a downtrend in the Zacks Consensus Estimate. The downward earnings estimate revisions in the last 30 days led to a 59.7% decline in the Zacks Consensus Estimate for 2014 to 31 cents, whereas for 2015, the Zacks Consensus Estimate declined 9.2% to $1.58.

Moreover, stiff competition from other key players in the engineering and construction industry including Fluor Corporation (FLR), AECOM Technology Corporation (ACM) and Foster Wheeler AG (FWLT), remains a concern going forward.

Read the Full Research Report on FWLT
Read the Full Research Report on FLR
Read the Full Research Report on ACM
Read the Full Research Report on KBR

Zacks Investment Research