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KBR Inks Aircrew Services Contract, Fortifies Government Unit

Zacks Equity Research

KBR, Inc. KBR has clinched a contract from Naval Air Systems Command to provide aircrew services to the Naval Air Warfare Center Aircraft Division. The contact, valued at $81 million, spans for five years and the company has an option to extend the same for six months.

Per this cost-plus-fixed-fee, indefinite-delivery/indefinite-quantity contract, KBR will support the mission essential test and evaluation of all manned and unmanned air vehicles for Naval Test Wing Atlantic and Pacific squadrons via its certified and qualified aircrew.

This contract will enable KBR to continue playing an integral role in the Navy's developmental flight and ground test programs through the Government Solutions business in the United States.

KBR’s Government Business Reflects Strong Growth Potential

The company’s Government Solutions business, accounting for 72.7% of revenues, has been serving the U.S. Air Force, Army, Navy, Marine Corps, and other federal agencies and foreign allies over the past several years. Its sustainment engineering solutions help these agencies to enhance life-cycle costs, improve operational readiness, drive innovation, and ensure mission success on land, in air, at sea, and in space and cyberspace.

Organically, sales from the Government Solutions business recorded 22% and 16% growth in the first and second quarters of 2019, respectively. The segment recorded 30% revenue growth in first-half 2019. Its continued 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.

Courtesy of robust contribution from Government Solutions and Technology businesses and ongoing growth in overseas logistics and mission support programs, shares of KBR have climbed 64.9% so far this year, broadly outperforming the industry’s 17.8% rally. Solid backlog level of $13.82 billion (as of Jun 30, 2019) compared with $13.5 billion at 2018-end highlights its underlying strength. Notably, more than 77% of the backlog represents work in Government Solutions.

Stocks to Consider

Three players with solid near-term prospects in the construction space are MasTec Inc. MTZ, Jacobs Engineering Group Inc. JEC and EMCOR Group, Inc. EME. While MasTec sports a Zacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MasTec is likely to see earnings growth of 34.2% in 2019.

Jacobs has a three-five year expected EPS growth rate of 11%.

EMCOR is likely to see earnings growth of 15.9% in 2019.

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