Updated Research Report on KBR - Analyst Blog

On Apr 11, 2014, we issued an updated research report on KBR Inc. KBR. The company has secured a substantial share of the Liquefied Natural Gas LNG and ammonia processing market.

The momentum in shale gas revolution in North America is generating promising opportunities for LNG, ammonia and ethylene projects. KBR is benefiting from this upside in the LNG market and has been receiving a steady inflow of orders globally from large refineries as well as oil and gas facilities.

KBR reported dismal fourth-quarter 2013 results with adjusted income of 52 cents per share, which fell significantly short of the Zacks Consensus Estimate of 90 cents. The quarterly revenues had also declined owing to poor performances at its Gas Monetization segment and Infrastructure, Government and Power segment. The company's share price has trended downward since then, decreasing by more than 18% in less than 3 months.

The delay in completion of a number of projects dragged revenues further. Moreover, the company was negatively impacted by adverse tax conditions and additional legal and foreign exchange charges that were not anticipated earlier.  However, the company's strong cash flow and a healthy book-to-bill ratio partially offset the negatives.

This Zacks Rank #5 (Strong Sell) stock has delivered negative earnings surprises in 2 of the trailing 4 quarters with an average miss of 12.63%. The Zacks Consensus Estimate for 2014 earnings of $1.90 per share indicates a decrease of 11.21% compared with the prior-year earnings.

The company is prone to be impacted by currency fluctuations and adverse global, political and economical conditions as a large portion of the company's revenues is derived from non-U.S. markets.

Some better-ranked stocks that can be considered at the moment include VSE Corp. VSEC, Willdan Group, Inc. WLDN and Quanta Services, Inc. PWR, all of which have a Zacks Rank #2 (Buy).