KBR Q1 Earnings Top on Solid Government Business, Stock Up
Shares of KBR, Inc. KBR gained more than 1% during yesterday’s trading session, following its better-than-expected first-quarter 2019 results. Notably, industry-leading organic growth in Government Services and Technology business led to the company’s impressive performance.
Adjusted earnings came in at 36 cents per share, beating the Zacks Consensus Estimate of 33 cents by 9.1%. The reported figure also increased 5.9% year over year from 34 cents per share registered a year ago.
Total revenues of $1.34 billion increased 29% year over year backed by robust performance of Government Services and Technology business. The top line also surpassed the consensus mark by 11.9%.
Segmental Data
Effective Jan 1, 2019, KBR has changed the name of its Government Services segment to "Government Solutions", Technology segment to "Technology Solutions", and Hydrocarbons Services segment to "Energy Solutions".
Revenues at the Government Solutions segment rose an impressive 44% year over year to $975 million. The upside was primarily driven by 22% organic growth owing to on-contract growth and new work awarded under its portfolio of well-positioned contracting vehicles. Incremental revenues and accretive earnings from the acquisition of SGT and consolidation of Aspire added to the positives.
Technology Solutions’ revenues increased 48.4% year over year to $92 million. This improvement was attributable to a 48% rise in organic revenues as the demand for KBR’s innovative solutions grew across the chemical, petrochemical and refining markets. Also, higher proprietary equipment sales contributed to the upside.
Energy Solutions’ revenues declined 9% year over year to $272 million.
As of Mar 31, 2019, total backlog came in at $13.6 billion compared with $13.5 billion at 2018 end.
Of the total backlog, the Government Solutions booked $10.8 billion. Technology Solutions accounted for $547 million and the Energy Solutions segment contributed $2.3 billion to the total backlog. Backlog from the Non-strategic Business totaled $2 million.
KBR, Inc. Price, Consensus and EPS Surprise
KBR, Inc. Price, Consensus and EPS Surprise | KBR, Inc. Quote
Liquidity & Cash Flow
As of Mar 31, 2019, KBR’s cash and equivalents were $708 million, down from $739 million at the end of 2018.
In the first quarter, cash flow provided by operating activities totaled $48 million compared with $130 million of cash used in operating activities a year ago.
2019 Guidance Maintained
KBR expects adjusted earnings per share in the band of $1.58-$1.73. Operating cash flows are projected in the range of $175-$205 million, reflecting operating cash flow to net income ratio of 90-110%. Moreover, the effective tax rate is anticipated between 23% and 25%.
Major Contract Wins
First-quarter 2019 book-to-bill was 1.1x, excluding the workoff of its long-term private finance initiatives, or PFIs.
Among the major wins, in April 2019, KBR received multiple prime contracts to provide logistics support services to the U.S. Army, coalition partners and other federal agencies under the $82 billion LOGCAP V contract.
Zacks Rank & Stocks to Consider
KBR has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Zacks Engineering - R and D Services industry are Apergy Corporation APY, Jacobs Engineering Group Inc. JEC and AECOM ACM. While Apergy and Jacobs sport a Zacks Rank #1 (Strong Buy), AECOM carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Apergy and Jacobs’ three-five year expected EPS growth rate is projected at 24.2% and 10.1%, respectively.
AECOM surpassed earnings estimates in all of the trailing four quarters, the average positive surprise being 3.7%.
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