KBR Misses on Q3 Earnings, Down 2.3%, Beats Revenues - Analyst Blog

Shares of KBR, Inc. (KBR) dipped 2.3% yesterday, when the company declared its third-quarter 2014 results. KBR reported earnings of 21 cents per share, missing the Zacks Consensus Estimate of 26 cents by 19.2%. In the prior-year quarter, the company had reported a loss of 32 cents per share.

 

 

Revenues dropped 5.6% year over year to $1,657 million, though it surpassed the Zacks Consensus Estimate of $1,633 million. Gross profit plunged to $30 million from $114 million in the year-ago quarter.

Results were impacted by the disappointing performance of KBR's Infrastructure, Government and Power segment, which was affected primarily by the additional charges on a North America-based power project. However, the company witnessed a significant improvement in its Canada-based fabrication and module assembly projects, which had been a drag on its results for the past few quarters. Strong growth in the company's Hydrocarbons segment was also a positive in the quarter.

Segment Details

Gas Monetization segment's revenues decreased 36.1% year over year to $343 million. The decline was primarily owing to low volumes in an Australia-based liquefied natural gas (LNG) project, coupled with some other projects completed in 2013.

Revenues in the Hydrocarbons segment increased 53.6% year over year to $559 million. The revenue growth came on the back of developments in the downstream engineering, procurement and construction (EPC) activities in ammonia, urea and ethylene projects in key regions like North America. This apart, developments in oil and gas projects across the world also benefited the segment.

The Infrastructure, Government and Power (IGP) segment's revenues declined 8.3% year over year to $342 million. The business was impacted by reduced activity in the U.S. Government projects, especially in LogCAP IV and lower work volumes in Infrastructure and Minerals contracts. This apart, expectation of higher costs in the company's North America Power project also weighed down on segmental results.

The Services segment reported a revenue decline of 12.9% year over year to $405 million. The company's Canada-based pipe fabrication and module assembly projects were stabilized in the quarter, as against losses incurred in the past year.

Other Financial Details

KBR ended the quarter with cash and cash equivalents of $1,048 million and shareholders' equity of $2,325 million.

Operating cash flow in the quarter was $158 million, a decline from the prior-year period figure of $178 million. However, the company's operating cash flow for the nine-month period (ended Sep 30, 2014) came in at $178 million, a significant improvement from the year-ago period figure of $81 million.

In the quarter, the company repurchased shares worth $6 million and paid dividends of $11 million. Year-to-date, KBR has repurchased 3.7 million shares and paid $137 million for repurchase and dividends.

Zacks Rank

KBR currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Pernix Group Inc (PRXG), Quanta Services, Inc. (PWR) and AO Smith Corp. (AOS). All these stocks carry a Zacks Rank #2 (Buy).

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