KBR Gets $52 Million Contract Extension From Marine Corps

KBR, Inc. (NYSE:KBR) has received a six-month contract extension, valued at $52 million, for global government services business, KBRwyle, to provide prepositioning and logistics support services to U.S. Marine Corps’ (“USMC”) Blount Island Command.

Per the deal, KBRwyle will acquire, maintain, and preposition equipment as well as other essential supplies in Jacksonville, FL. Also, it will provide logistics services to support preservation and packaging, shipping and receiving, as well as maintenance throughout the United States.

In addition to Florida, KBRwyle will support prepositioned stock in Kuwait and Norway, as well as aboard 12 Navy ships in the Indian and Pacific Oceans.

Being a leading provider of prepositioned stock to the USMC and U.S. Army, KBRwyle has been providing a full range of logistics services across the world for more than 35 years. Notably, its Government Services (“GS”) segment, which accounts for nearly 73% of the total revenues, has been performing pretty well.

In the first nine months of 2018, its GS segment revenues rose an impressive 56.3% year over year to $2.5 billion. Also, the segment’s backlog as of Sep 30, 2018 increased 34.9% on a year-over-year basis. The improvements were backed by strong organic revenue growth in logistics and engineering business, along with revenue contribution from the acquired businesses.

Majority of the government services contracts are long-term reimbursable annuity-type contracts that have significantly lower risks than other projects. The company believes that its low-risk projects will help in margin expansion and de-risking of business considerably. In fact, in the first nine months of 2018, gross margin in the GS segment grew 140 basis points to 8.2%.

Meanwhile, shares of KBR have increased 25.9% over a month, outperforming its industry’s rally of 20.3%. The share price performance was mainly driven by considerable revenue and margin growth, along with strong GS business. Earnings estimates for the current and next year have moved north by 0.7% and 3.7%, respectively, over the past 60 days, reflecting analysts’ optimism surrounding the company’s earnings growth potential.



Presently, KBR is optimizing its growth potential on the back of government services business. Moreover, its contract winning spree underscores KBR's solid presence and expertise in providing logistics services worldwide.

Zacks Rank & Other Stocks to Consider

Currently, KBR carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the Zacks Construction sector include Altair Engineering Inc. (NASDAQ:ALTR) , Gates Industrial Corporation PLC (NYSE:GTES) , and Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Altair Engineering, Gates Industrial and Great Lakes’ earnings for the current year are expected to increase 23.1%, 44.6% and 111%, respectively.

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