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KBR Wins Contract From Haiwan Chemical, Backlog Keeps Growing

Zacks Equity Research

KBR, Inc. KBR recently won a contract from Qingdao Haiwan Chemical Co., Ltd. under which it will supposedly license phenol and acetone technology for a plant in Qingdao City, Shandong Province, China.

The contact also requires KBR to provide technology license and engineering design for building a 320,000-ton-per-annum phenol/acetone plant in the Dongjiakou Industrial Zone.

The contract win highlights KBR’s focus on building its technology and consulting business. The company’s 60-year-old phenol and acetone technology has lent it a competitive edge there, helping it complete more than 50 phenol projects globally.

Backed by solid backlog growth and increased earnings and revenues, shares of KBR have gained 65.2% so far this year, outperforming the industry’s rally of 27.8%.

 

Technology Solutions to Gain Further

The Qingdao Haiwan Chemical contract is likely to help KBR strengthen in the Technology Solutions segment. The segment maintains strength on refining and petrochemicals projects in China, India and Africa, as well as strong technology demand.

In the first quarter, the segment saw 48% organic growth. This was primarily backed by rising demand for its innovative solutions across chemical, petrochemical and refining markets, as well as increased bundling of technology licenses with ancillary services, proprietary equipment and catalysts.

Meanwhile, KBR licenses and designs polycarbonate synthesis and compounding plants as well as complementary phenolic technologies, including phenol/acetone, and bisphenol-A (BPA). Earlier this year, the company was awarded a contract by Cangzhou Dahua New Materials Co., Ltd. to build a polycarbonate plant in Cangzhou City, China.

Wrapping Up

Mainly, the Qingdao Haiwan Chemical contract will help KBR boost its backlog. Of the total first-quarter 2019 backlog, Technology Solutions accounted for $547 million which is likely to rise in the quarters to come.

The overall top line is also expected to rise on frequent contract wins. Meanwhile, the Zacks Consensus Estimate for the company’s 2019 revenues is pegged at $5.6 billion, suggesting a 4.7% year-over-year increase.

Zacks Rank & Other Stocks to Consider

KBR currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the industry include Quanta Services PWR, Jacobs Engineering JEC and Altair Engineering ALTR, each carrying the same rank as KBR. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quanta Services, Jacobs Engineering and Altair Engineering’s earnings for 2019 are expected to rise 29.5%, 5.2% and 53.7% respectively.

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