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KBR Q4 Earnings & Revenues Beat on Solid Government Business

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Shares of KBR, Inc. KBR gained more than 5.6% during yesterday’s trading session, following better-than-expected results in fourth-quarter 2018. The positive performance was mainly backed by industry-leading organic growth in Government Services business. Also, it provided encouraging guidance for 2019 on the back of solid performance in 2018 across the business.

The company reported adjusted earnings of 39 cents per share, beating the Zacks Consensus Estimate of 37 cents by 5.4%. Also, the reported figure increased 39.3% year over year from 28 cents per share a year ago.

Total revenues came in at $1.33 billion, up 41.9% year over year, backed by robust performance of Government Services and Technology business. Also, the reported figure surpassed the consensus mark of $1.25 billion.

Segmental Data

Revenues in the Government Services segment rose an impressive 77.9% year over year to $984 million. The upside was primarily driven by 31% organic growth, backed by on-contract growth, take-away wins 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’s revenues increased 12.3% year over year to $82 million. The growth was attributable to 12% rise in organic revenues, as the demand for the company’s innovative solutions grew across chemical, petrochemical and refining markets. Also, bundling of technology licenses with ancillary services, proprietary equipment and catalysts contributed to the upside.

Hydrocarbons Services revenues were down 15.2% year over year to $263 million.

As of Dec 31, 2018, total backlog came in at $13.5 billion compared with $10.6 billion in the corresponding period of 2017.

Of the total backlog, the Government Services segment booked $11 billion (up 31.7% year over year). Technology accounted for $594 million (up 53.5%) and the Hydrocarbons Services segment contributed $1.9 billion to the total backlog (up 4.1%). Backlog from the Non-strategic Business totaled $2 million (down 66.7%).

Liquidity & Cash Flow

As of Dec 31, 2018, KBR’s cash and equivalents were $739 million, up from $439 million at the end of 2017.

In 2018, cash flow provided by operating activities totaled $165 million, lower than $193 million in the prior year.

Full-Year 2018 Review

In full-year 2018, the company reported adjusted earnings of $1.53 per share, up 2.7% on a year-over-year basis. Revenues of $4.9 billion also grew 17.8% from a year ago.

Notably, the company’s book-to-bill ratio in 2018 was 1.2, excluding the workoff of its long-term privately financed initiatives (PFIs).

2019 Guidance

KBR initiated its full-year 2019 view. The company 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, effective tax rate is anticipated between 23% and 25%.

Major Contract Wins

In 2018, KBR clinched some prestigious awards in Government Services, Technology and Hydrocarbons Services segments.

Government Services unit clinched a $500-million contract to provide personal services in human performance and behavioral health to the U.S. Special Operations Command. Also, it won a contract from LIG Nex1 to support the Korean military's Identify Friend or Foe capabilities. KBR booked a seat on the U.S. Army Information Technology Enterprise Solutions-3 Services Contract in 2018.

The Technology business continued to direct a few first-of-a-kind technologies such as K-SAAT, a revolutionary technology that increases octane for high-quality gasoline blending in a safer and operationally efficient manner. Additionally, its ROSE®technology, an effective solution enabling refiners to meet IMO 2020 requirements, help reduce sulfur content and emissions of marine fuels.

Under Hydrocarbon Services, the company added some quality projects that are aligned with its commercial strategies and deep technical expertise. For instance, the company’s deal with ExxonMobil to provide detailed engineering, procurement and construction services for their crude expansion project in Texas; refinery debottlenecking project with SATORP; a joint venture between Saudi Aramco and Total, as well as a front-end engineering design project for Shell Australia's Crux project to build an autonomous offshore platform and gas pipeline in Western Australia.

Zacks Rank & Peer Releases

KBR currently has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jacobs Engineering Group Inc. JEC reported fourth-quarter 2018 earnings of 78 cents per share, increasing 69.6% from the year-ago level of 46 cents. Total revenues came in at $3,083.8 million, reflecting healthy growth of 73% from the year-ago quarter.

Fluor Corporation FLR reported fourth-quarter 2018 earnings of 77 cents per share, surpassing the Zacks Consensus Estimate of 61 cents by 26.2%. Earnings also increased 10% from the year-ago level.

AECOM ACM reported fourth-quarter 2018 earnings of 56 cents per share, beating the consensus mark of 52 cents by 7.7%. Total revenues of $5,037.5 million increased 2.6% on a year-over-year basis.

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