KBR Formalizes Design Services Subcontract With Naval Group

KBR Inc. (NYSE:KBR) recently announced that it has formally signed a Design Services Subcontract (DSSC) with Naval Group. Per the deal, KBR will support Naval Group in the concept design of the planned Future Submarine construction yard at the Osborne Naval Shipbuilding precinct, located in South Australia.

The concept design will take into account the facilities and infrastructure needed to build a fleet of twelve advanced Future Submarines for the Royal Australian Navy. The DSSC will facilitate Naval Group in delivering Future Submarine yard’s concept design to the Commonwealth of Australia, in July 2018.

KBR’s vast defence infrastructure engineering & program management experience, including that of the recent Air Warfare Destroyer shipyard contract and the original Collins submarine facility contract in South Australia, is expected to prove conductive to this project.

Other Notable Contracts

Some other notable contracts clinched by the company recently include a $34.1-million task order deal from the U.S. Air Force and a $69.3-million indefinite-delivery/indefinite-quantity (IDIQ) contract from the Naval Air Warfare Center Aircraft Division. This apart, the company secured a contract from PT Panca Amara Utama (PAU) to offer Ammonia InSite Technology to PAU's new ammonia plant complex in Indonesia.

Growth Drivers

KBR is banking on the strength of its Government Services businesses to optimize its growth potential. This particular business is growing steadily and adding to the company’s bliss. Moving ahead, the company expects growth across all its key markets in the United States, the UK and Australia driven by continued opportunities across the lifecycle of projects. Also, KBR foresees decent opportunities in ammonia, petrochemical and refining. An increasing portfolio of smaller and OpEx-facing projects, services, program management and maintenance contracts gives the company a stronger foundation compared with previous years.

Moreover, the company’s penchant for acquisitions and strategic alliances are expected to bolster its growth and expand market share. In this regard, KBR completed several notable buyouts, including Honeywell Technology Solutions and Wyle. This apart, it remains optimistic about backlog growth owing to the pipeline of opportunities. In the past year, this Zacks Rank #3 (Hold) company’s shares have returned 24% against the industry’s decline of 4.2%.

Headwinds

Despite these positives, lower revenues from the Engineering and Construction segments have been a pressing concern for the company. Also, volatility in the oil and gas markets with oversupply might strain the prices and spending levels and in turn hurt the company’s projects and orders.

Key Picks

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

Fluor has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 8.4%.

Willdan Group has outpaced estimates in the preceding four quarters, with an average earnings surprise of 45.4%.

Jacobs Engineering Group has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 11.4%.

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