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KBR Set to Conduct Hydrogen Feasibility Study With Argus

Zacks Equity Research

KBR, Inc. KBR and Argus Media (Argus) have received a contract from the National Climate Change Secretariat (“NCCS”), Strategy Group, in Singapore to carry out a feasibility study on hydrogen imports and downstream applications.

Details of the Contract

The primary objective of the project — which was commissioned by NCCS, the Singapore Economic Development Board and Energy Market Authority — is to assess the feasibility of hydrogen for long-term cost-competitive emission reduction in Singapore. To fulfill this objective, KBR and Argus will conduct an extensive study to find out potential sources of hydrogen that will provide security till 2050.

Per the deal, KBR will undertake various workshops and consultation sessions with key participants like representatives from hydrogen supply, manufacturing, power generation, and transport sectors. Also, it will recommend research, development and deployment (“RD&D”) investment opportunities to develop a competitive hydrogen economy in the long term.

Meanwhile, Argus' expertise in energy markets will be used to assess the potentiality of the latest hydrogen alternative to switchover from conventional fossil fuel technologies.

Notably, KBR’s Energy Solutions business will support NCCS and team to meet the energy efficient alternatives for Asia Pacific. Markedly, the company is one of the industry leaders that meet the world's ever-growing energy and chemical needs.

Solid Project Execution Strategy to Boost Top Line

KBR has a solid track record of receiving high-end and differentiated contracts across the business. As of Jun 30, 2019, the company recorded a backlog of $13.82 billion compared with $13.5 billion at 2018-end, highlighting underlying strength in different markets.

KBR’s Energy Solutions segment — which constitutes almost one fifth of the total revenues — has strong opportunities in Brownfield (especially in the consulting sector in the upstream area), selective downstream petrochemical and ethylene projects, along with a growing number of small-scale LNG projects in North America. The company anticipates persistent growth in the segment, with margin expansion in the mid-20% range.

KBR believes that a healthy balance between energy and government projects will position it well for future growth. At the end of the second quarter, the segment contributed $2.63 billion to its total backlog. Of the said backlog, 75% represents service businesses like high-end technical consultancy, pre-FEED, FEED and PMC, as well as sustaining capital construction services and maintenance.

Our Take

Shares of KBR — which shares space with AECOM ACM, Jacobs Engineering Group Inc. JEC and Altair Engineering Inc. ALTR in the Zacks Engineering - R and D Services industry — have broadly outperformed its industry so far this year. Estimates for 2019 have moved 0.6% upward over the past 60 days, reflecting analysts’ optimism surrounding KBR’s earnings growth potential.



We believe that the price performance of this Zacks Rank #2 (Buy) company was mainly backed by a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in eight of the trailing nine quarters. Also, contract winning spree and solid project execution underscore its proven ability to safely and efficiently deliver projects in operating facilities. Notably, the recent contract win will further boost the company’s prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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