KBR Arm Wins Navy Contract, Aids Government Service Business

Zacks Equity Research - finance.yahoo.com Posted 5 years ago
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KBRwyle, a global government services unit of KBR, Inc. KBR, has received a contract modification to provide base operating support services (“BOSS”) at the Navy Support Facility, Diego Garcia, located in the British Indian Ocean Territory. The contract is valued at $62 million.

Per the deal, KBRwyle will look after the welfare and wellbeing of its sailors, as well as support the base. KBRwyle will facilitate sailors with IT, management, utilities, administration and public safety services; morale, welfare and recreation support; as well as port and air operations facilities.

The BOSS contract, which was awarded by Naval Facilities Engineering Command (“NAVFAC”) Pacific, was originally received by KBR in 2017. Moreover, the $515-million contact marks the first of a possible seven option years.

KBRwyle has been offering operations, maintenance and logistics services to the U.S. government since WWII. Notably, the company is now performing these services in the most extreme and austere environments for the U.S. Navy and Army military bases across the world.

Contracts Wins a Major Growth Driver

KBRwyle continues its contract winning spree with the addition of another year of BOSS contracts to its list. On Jan 7, 2019, KBRwyle secured a seat on a U.S. Army Information Technology Enterprise Solutions-3 (“ITES-3”) services contract for its business unit, SGT, LLC. Per the contract, KBRwyle will provide a wide range of IT services to help the Army in fulfilling its warfighter and global mission.

Also, it clinched two task order modifications amounting to $114 million from the Army Contracting Command on Dec 11, 2018. Under the contract, the company will provide logistics support services to the U.S. Army in Europe and the Arabian Peninsula. The move underscores KBR's solid presence and expertise in providing professional services to support military needs.

These contracts highlight KBR’s efforts to earn high-end and differentiated government services work.

Our Take

We believe that the recent move will further boost revenues in KBR’s Government Services segment. The segment, accounting for more than 72.6% of its total revenues, has been performing pretty well.

In the first nine months of 2018, KBR’s total backlog of $13.5 billion was up 27.4% from a year ago. Out of the total backlog, 81.8% work was done by government services segment. In fact, backlog in the segment increased 34.9% on a year-over-year basis in the said period.

Notably, the company’s total revenues increased 23.6% year over year, courtesy of 59.5% growth of the government services business. Presently, KBR is optimizing its growth potential on the back of government services business.

Meanwhile, shares of the company have decreased 15.5% over a year, comparing favorably with its industry’s decline of 30.1%.



Zacks Rank & Stocks to Consider

Currently, KBR carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Construction sector are Gates Industrial Corporation PLC GTES, Great Lakes Dredge & Dock Corporation GLDD and Armstrong Flooring, Inc. AFI. While Gates Industrial sports a Zacks Rank #1 (Strong Buy), Great Lakes and Armstrong Flooring both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gates Industrial has an expected earnings growth rate of 44.6% for 2018.

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

Armstrong Flooring has a projected earnings growth rate of 104.8% for 2018.

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