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KBR Wins Place in DoD IAC to Build/Upgrade US Navy Aircraft

KBR, Inc. KBR won a $69.2-million task order from the U.S. Air Force's 774th Enterprise Sourcing Squadron within the Department of Defense Information Analysis Center's (DoD IAC) multiple-award contract (MAC) vehicle.

Per this task order, KBR will provide total life cycle management of critical airborne manned reconnaissance aircraft systems for the Naval Surface Warfare Center Crane (NSWC Crane) and the Naval Air Systems Command (NAVAIR) E-2/C-2 Airborne Command and Control Program Office (PMA 231).

While developing and integrating new technology, KBR will modify and upgrade legacy technology for aircraft intelligence, surveillance, reconnaissance and targeting (ISR&T) systems.

KBR’s Government Solutions (GS) U.S. president, Byron Bright, stated, "With this win, our advanced R&D, modeling and simulation, and logistics and engineering experts will support the development of the next generation of advanced ISR&T systems for the Navy, while ensuring the sustainment of legacy systems until they reach sundown."

The E-2 is the foremost carrier-born aircraft capable of early detection of enemy threats and responses to carrier operations conducted in accordance with America's declared defense strategy. The work will primarily focus on the E-2D Advanced Hawkeye, with additional support for the E-2C Hawkeye and C-2A Greyhound aircraft.

Zacks Investment Research
Zacks Investment Research

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The stock fell 1.77% post news release on Nov 28, but outperformed the Zacks Engineering - R and D Services industry in the past six months. KBR’s shares have gained 3.4% in the said period against the industry’s 1.9% fall. KBR has supported the E-2 program through multiple E-2C upgrade projects and programs and the development and fielding of the E-2D Advanced Hawkeye platform for more than 30 years.

Solid Technology Solutions Aid Backlog

For more than 50 years, KBR has been leading the process technology development, commercialization and plant design solutions industries. KBR’s best-in-class technologies have been designing and building end-to-end, sophisticated digitization solutions and services for clients worldwide. KBR is a leader in energy transition and has extensive experience supporting sustainable energy projects across the globe.

These digitized technologies and solutions help companies increase efficiency and productivity, reduce costs and create opportunities to generate higher revenues and profitability. It has been driving growth by focusing on lowering carbon emissions, product diversification, energy efficiency and more sustainable technologies and solutions.

KBR’s solid backlog level of $15.77 billion (as of Sep 30, 2022) reflects its underlying strength. The company’s impressive 2021 and the first nine months of 2022 performances reflected its unwavering focus and superb business execution. Solid double-digit top-line growth, strong organic growth in the Government Solutions unit and robust adjusted EBITDA growth are commendable. The impressive performance was backed by a solid contract-winning spree, strong project execution, backlog level and potential government and technology businesses.

Upbeat Views

Backed by favorable market tailwinds, good booking momentum and a strong first nine months of 2022, KBR lifted strong 2022 guidance. For 2022, the company expects total revenues in the range of $6.5-$6.7 billion (versus $6.4-$6.8 billion expected earlier) and an adjusted EBITDA margin of 10%. It expects an effective tax rate between 23% and 24% (versus the earlier projections of 24% and 25%) and adjusted earnings per share in the band of $2.60-$2.65 (compared with $2.53-$2.65 expected before). Adjusted operating cash flow is projected to be $375-$400 million (versus an earlier projection of $360-$400 million).

In 2021, the company generated total revenues of $7.34 billion, an adjusted EBITDA margin of 8.5% and adjusted earnings of $2.42 per share. It had an adjusted operating cash flow of $319 million.

Zacks Rank & Key Picks

Currently, KBR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks that warrant a look in the same industry include CI&T Inc. CINT, Sterling Infrastructure, Inc. STRL and Altair Engineering Inc. ALTR, each carrying a Zacks Rank #2 (Buy).

CI&T is a global digital specialist, which has been benefiting from a solid acquisition strategy, an improving client base, and an expansion into new markets and verticals. Also, robust organic growth in its four operating regions — North America, Latin America, Europe, and Asia Pacific — bode well. CI&T’s focus on speed and digital efficiency resonates extremely well with large and innovative companies in today’s world.

CINT’s expected earnings growth rate for 2022 is 29.2% and 41.9% for 2023.

Sterling Infrastructure specializes in E-Infrastructure, Building and Transportation Solutions principally in the United States. The company has been navigating the ongoing supply chain and inflation challenges with growth in its E-Infrastructure Solutions (its largest segment), E-Infrastructure and Building Solutions. With continued demand for complex site development, STRL has been broadening its customer base with industrial and manufacturing opportunities in E-Infrastructure Solutions, thereby helping it to generate higher profits. Focus on the execution of strategic objectives also bodes well.

STRL’s expected earnings growth rate for 2022 and 2023 is 47.4% and 6.3%, respectively.

Altair Engineering provides software and cloud solutions in simulation, high-performance computing, data analytics and AI worldwide.

ALTR’s expected earnings growth rate for 2022 and 2023 is pegged at 10.6% and 21.5%, respectively.

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