KBR Unit Secures Seat On $900 Million IDIQ Defense Contract

KBR, Inc.’s (NYSE:KBR) global government services business, KBRwyle, recently secured a seat on a multi-award contract by the U.S. Army Corps of Engineers Engineering Research and Development Center.

Per the contract, KBRwyle has been selected as one of the six prime contractors on the $900 million indefinite-delivery, indefinite-quantity (IDIQ) contract, under which the company is entitled to provide rapid solutions for fixing problems identified through the Department of Defense's (DoD) Joint Test and Evaluation (JT&E) Program.

This 10-year, cost-plus-fixed-fee contract also allows KBRwyle to assist the JT&E program in finding options for U.S. warfighters to achieve their missions. Moreover, KBR will also have the chance to bid on task orders issued by the JT&E Program Offices to address and resolve critical warfighter issues.

KBR Banking on Government Services Businesses

The company’s Government Services segment, accounting for more than 65% of its total revenues, has been performing pretty well. The segment performed impressively in the last reported quarter, driven by organic growth and new award wins from the U.K. Ministry of Defence, U.S. Air Force and Naval Air Warfare Center Aircraft Division. The division’s revenues rose an impressive 31.5% year over year to $677 million. Further, the company expects growth across all key markets in the United States, UK and Australia on account of continued opportunities across the lifecycle of its projects.

Recently, KBRwyle secured a cost-plus-fixed-fee contract modification from the Army Contracting Command. Per the deal, KBR will offer base life-support services to the U.S. Army throughout Iraq, supporting the Operation Inherent Resolve. Estimated revenues related to this one-year task order modification will be booked as unfilled orders in the Government Services business segment’s backlog. (Read more: KBR Secures Modification Contract From ACC to Support OIR).

Share Price Performance

KBR, a Zacks Rank #2 (Buy) stock, has a robust inorganic strategy in place for expanding its market share. In this regard, the company completed the Stinger Ghaffarian Technologies (“SGT”) and the Aspire buyouts in April. These additions are in sync with its strategies to expand high-tech professional services across the Government Services sector and have helped the stock to gain 4.4% in the past three months, outperforming the industry it belongs to.

The company remains optimistic about the prospects of both the buyouts, mainly on account of increased government spending across space and defense. We believe such strategic buyouts will likely give a major boost to KBR’s top line, going ahead.

Other Key Picks

Other top-ranked stocks in the same space include Jacobs Engineering Group Inc. (NYSE:JEC) , Quanta Services, Inc. (NYSE:PWR) and Gibraltar Industries, Inc. (NASDAQ:ROCK) .

Jacobs Engineering Group holds the same rank as KBR. Its earnings are expected to grow 31.5% in 2018. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quanta Services’ earnings are expected to grow 41.6% in 2018. It also carries a Zacks Rank #2.

Gibraltar Industries is also a Zacks Rank #2 stock and its earnings for the current year are expected to grow 21.6%.

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