KBR Beats Q3 Earnings & Revenue Estimates, Raises 2021 View

KBR (NYSE:KBR), Inc.’s KBR shares gained 2.2% on Oct 28, after it reported impressive third-quarter 2021 results — wherein earnings and revenues topped the Zacks Consensus Estimate — and raised its full-year view. The company benefited from solid Government Solutions organic growth and strong execution across the business.

Elaborating on the quarterly performance, Stuart Bradie, KBR’s president and CEO, said, "Impressive organic growth across each of our government businesses, end-market momentum across the entire portfolio and a significant award in the quarter to provide humanitarian support under Operation Allies Welcome combine to give us confidence in our raised 2021 earnings guidance."

Meanwhile, it has wrapped up the acquisition of Frazer-Nash Consultancy for approximately $400 million.

Inside the Headline Numbers

Adjusted earnings of 64 cents per share surpassed the consensus estimate of 57 cents by 12.3% and increased 45.5% from 44 cents reported a year ago.

Total revenues increased 33.6% year over year to $1,843 million. Organically, sales grew 20% from the prior-year quarter. The top line beat the consensus mark of $1,552 million by 18.8%.

Adjusted EBITDA increased 29.6% year over year to $162 million for the quarter driven by strong performance of the Government Solution business, acquisitions and solid project execution.

Segmental Details

Revenues in the Government Solutions segment increased 53.5% year over year to $1,555 million, with 13% organic growth. Four business areas of the segment generated year-over-year growth. Yet, Sustainable Technology Solutions' revenues decreased 21.3% year over year to $288 million.

Backlog

As of Sep 30, 2021, total backlog was $14.76 billion compared with $15 billion at 2020-end. Of the total backlog, Government Solutions booked $12.45 billion. The Sustainable Technology Solutions segment accounted for $2.31 billion of the total backlog.

Liquidity & Cash Flow

As of Sep 30, 2021, KBR’s cash and cash equivalents were $550 million, up from $436 million at 2020-end. Long-term debt was $1,578 million at quarter-end, slightly down from $1,584 million at 2020-end.

For the first nine months of 2021, cash provided by operating activities totaled $276 million, up from $245 million in the year-ago period.

2021 Guidance Updated

For 2021, the company expects total revenues in the range of $7.2-$7.5 billion (versus $5.8-$6.2 billion expected earlier) and adjusted EBITDA margin of 8% (versus earlier prediction of 9%). Also, it expects the effective tax rate between 24% and 25% (compared with previous expectation of 25-26%), and adjusted earnings per share in the band of $2.30-$2.40 (versus $2.00-$2.20 of earlier expectation). The Zacks Consensus Estimate for 2021 earnings per share is currently pegged at $2.16.

Meanwhile, adjusted operating cash flow is now projected in the range of $300-$340 million.

Zacks Rank & Other Key Picks

KBR currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other top-ranked stocks in the Zacks Construction sector include Tri Pointe (NYSE:TPH) Homes Inc. TPH, Jacobs Engineering Group Inc (NYSE:J). J and Toll Brothers (NYSE:TOL) Inc. TOL. While Tri Pointe sports a Zacks Rank #1, the other two stocks carry a Zacks Rank #2.

Earnings for Tri Pointe, Jacobs, and Toll Brothers are expected to grow 80.2%, 13.9%, and 80%, respectively, for the current year.

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