KBR Anticipates No Interruptions In UK Defense Project

KBR, Inc. (NYSE:KBR) recently announced that it expects no interruption in the execution of a project being carried out through a joint venture with Carillion due to Carillion's liquidation. Currently, the company operates a stand-alone joint venture (JV) with Carillion on Project Allenby Connaught through its Aspire Defence entities.

The JV has been carrying out successful service operations for the Ministry of Defense since 2006, offering high quality design, construction as well as maintenance services to the British Army. Over the past three months, the company has been undergoing contingency planning and is well-positioned to carry out the operations.

Our Take

KBR is presently banking on the strength of Government Services businesses to optimize its growth potential. The particular business is growing steadily, adding to the company’s depth. The company expects growth across all its key markets in the United States, UK and Australia, driven by continued opportunities across the lifecycle of projects. For the Technology & Consulting segment, the company anticipates thriving global technology opportunities led by ammonia, refining and petrochemical projects to persist. Additionally, growing client operational expenditure is set to benefit the Engineering and Construction segment.

In the past six months, this Zacks Rank #3 (Hold) company has returned 33.7% outperforming the industry’s average growth of 20.1%. KBR’s eye on strategic acquisitions and alliances have bolstered inorganic growth and expanded market share. Over the past few quarters, KBR completed several strategic acquisitions, including two established and highly technical government services companies. This buyout fortifies the company’s position as a professional services and technologies provider.

Despite these positives, uncertain global political and economical conditions are likely to affect the company’s performance. Current volatility in the oil and gas markets, along with oversupply which is straining prices and spending levels, will hurt the company’s projects and orders. This apart, reduced capital expenditure by key clients and currency fluctuations are adversely impacting backlogs.

Stocks to Consider

Some better-ranked stocks from the same space include Thor Industries, Inc. (NYSE:THO) , Jacobs Engineering Group Inc. (NYSE:JEC) and Potlatch Corporation (NASDAQ:PCH) . While Thor Industries sports a Zacks Rank #1 (Strong Buy), Jacobs Engineering Group and Potlatch Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thor Industries has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 15.3%.

Jacobs Engineering Group has outpaced estimates in the preceding four quarters, with an average earnings surprise of 9.7%.

Potlatch Corporation has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 43.6%.

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