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KBR Secures Seat on DoS' $6B DiPSS Program, Boosts Backlog

Zacks Equity Research

KBR, Inc. KBR recently announced that it has won a seat in the U.S. Department of State’s (DoS) Diplomatic Platform Support Services (DiPSS) program to provide life support, logistics, operations and maintenance services worldwide.

Specifically, KBR is among the 11 awardees on DiPSS indefinite-delivery/indefinite-quantity (IDIQ) contracts, which has a maximum ceiling of $6 billion.

Under the contract, KBR is likely to perform facility maintenance and repair, procurement, critical supply functions, along with food service, base camp operations, property leasing, professional services, general construction, site renovations, and medical services.

Markedly, KBR will provide these services to the DoS and other U.S. government agencies across the world, irrespective of challenging environments. The project, which has an initial one-year ordering period and options for four additional one-year periods, is expected to be completed by 2024.

KBR’s Government Solutions Unit: A Bright Spot

Notably, KBR’s Government Solutions unit has the capability to accomplish a diverse spectrum of tasks. The company has been providing critical operations and logistics support to several government missions and assuring readiness of the U.S. military for more than 75 years.

Accounting for more than 72% of KBR’s total revenues, the said segment has been performing pretty well of late. The company’s overall business banks on strength of the segment to optimize growth potential.

In first-quarter 2019, the segment recorded revenue growth of 44% year over year. The upside was primarily driven by 22% organic growth owing to significant contract wins and new work awarded under its contracting vehicles portfolio. Also, solid growth from the acquisition of SGT and consolidation of Aspire added to the positives.

Remarkably, the company’s total backlog totaled $13.6 billion (as of Mar 31, 2019) compared with $13.5 billion in the corresponding period of 2018. Of the backlog, nearly 80% was booked under the Government Solutions business.

Going forward, KBR expects broad-based growth across all the segments, primary on the back of high-end and differentiated government business work, strong margin performance, and the technology and consulting business.

Coming to price performance, shares of the company have broadly outperformed its industry so far this year. The stock has gained 56.3% compared with the industry’s 18.4% average growth in the said period. The contract winning spree underscores KBR's proven ability to safely and efficiently deliver projects in operating facilities.

Zacks Rank & Key Picks

Currently, KBR carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Altair Engineering Inc. ALTR, AECOM ACM and Quanta Services, Inc. PWR. While Altair Engineering sports a Zacks Rank #1 (Strong Buy), AECOM and Quanta Services carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Altair Engineering’s 2019 earnings are expected to grow 53.7%.

AECOM has a solid earnings surprise history, having surpassed the consensus mark in all the trailing four quarters, with the average being 6.2%.

Quanta Services’ earnings for the current year are anticipated to increase 29.5%.

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