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KBR Wins Navy Contract, Eyes Government Solutions Growth

Zacks Equity Research

KBR, Inc. KBR has received $45.9 million task order from Naval Air Systems Command's (NAVAIR) Logistics and Maintenance Information Systems and Technology Division to provide logistics information technology services.

Under the Department of Defense Information Analysis Center's (DoD IAC) multiple-award contract (MAC), the company has been awarded this cost-plus-fixed-fee task order. Per the terms of the agreement, KBR will provide services like research, analysis, design, development, unit testing, verification and validation (V&V) integration testing, training, deployment, operations, and maintenance of IT solutions. The task order’s performance period is 56 months.

KBR Government Solutions U.S., president, Byron Bright, said that “KBR is very pleased to continue working with NAVAIR to deliver logistics IT solutions that improve maintenance, logistics efficiency, and operational readiness for the warfighter across the Naval Aviation Enterprise.”

Backed by solid backlog growth, and robust earnings and revenues, shares of KBR have gained 64.4% so far this year, outperforming the industry’s 26.6% rally.

Notably, KBR’s solid backlog level of $13.6 billion (as of Mar 31, 2019) compared with $13.5 billion in the corresponding period of 2018, highlights its underlying strength. Nearly 80% of the backlog represents work in Government Solutions.

Majority of these work are long-term reimbursable service annuity-type contracts that have significantly lower risks than some of the other projects. The company believes that this will ultimately help in margin expansion and de-risking of business considerably.


Government Services Solutions: Major Growth Driver

KBR’s Government Solutions unit, accounting for more than 72% of total revenues, recorded 44% revenue growth in the first quarter of 2019. This unit also recorded organic revenue growth of 22% during the same time period, following a 31% increase in fourth-quarter 2018.

Its industry-leading organic revenue growth was underpinned by on-contract growth in logistics and engineering, take-away wins alongside new contract awarded under the company’s portfolio of well-positioned contracting vehicles.

Zacks Rank & Other Stocks to Consider

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

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

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