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KBR's KBRwyle Secures Seat on $12.1B IDIQ US Army Contract

Zacks Equity Research

KBR, Inc.’s KBR KBRwyle secured a seat on a U.S. Army Information Technology Enterprise Solutions-3 (“ITES-3”) services contract for its business unit, SGT, LLC. KBRwyle has been selected as one of the prime contractors on the $12.1-billion indefinite-delivery, indefinite-quantity ("IDIQ") contract, which has a base period of five years along with four option years.

Per the contract, KBRwyle will provide a wide range of services to several IT areas, including cybersecurity, integration, telecommunications, supply chain management and business process engineering. With these services, KBRwyle will help the Army in meeting its warfighter and global mission.

The contract is managed by the Army's Computer Hardware, Enterprise Software and Solutions (“CHESS”), and is considered to be the main IT-related services across the world.

The contract will allow KBRwyle to expand its technical and IT-related services with the U.S. Army.

KBR’s Government Services Unit: A Bright Spot

KBRwyle, one of the leading providers of cyber and electronic security solutions in the United States, has a wide experience in developing IT solutions for mission-focused programs. It constantly delivers innovative and high-quality IT services.

The company’s Government Services segment, accounting for more than 72% of its total revenues, has been performing well. Presently, it is banking on the strength of the said segment to optimize its growth potential.

KBR’s backlog level of $13.5 billion as of Sep 30, 2018, highlights its underlying strength. About 81.8% of the backlog represents work in the Government Services segment, which increased 34.9% on a year-over-year basis in the third quarter. Notably, the company’s total revenues increased 23.6% year over year during the quarter, courtesy of 59.5% growth of the Government Services business. Such new contracts are likely to further boost revenues of the company.

Meanwhile, shares of the company have decreased 15.2% over a year, comparing favorably with its industry’s decline of 31.3%. Additionally, earnings estimates for 2018 have increased 1.3% over the past 60 days, reflecting analysts’ optimism surrounding the company’s potential.

Zacks Rank & Other Stocks to Consider

KBR currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the Construction sector are Great Lakes Dredge & Dock Corporation GLDD, Masco Corporation MAS, and United Rentals, Inc. URI. While Great Lakes currently sports a Zacks Rank #1 (Strong Buy), Masco and United Rentals carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Great Lakes’ earnings in 2018 are expected to increase 111%.

Masco has an expected earnings growth rate of 24.2% for 2018.

United Rentals has a projected earnings growth rate of 53.6% for 2018.

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