Yahoo Finance KBR (KBR) Up 2.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for KBR Inc. (KBR). Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is KBR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
KBR's Q4 Earnings Beat, Revenues Miss Estimates, Backlog High
KBR reported mixed results for fourth-quarter 2023 (ended Dec 29), wherein earnings surpassed the Zacks Consensus Estimate, but revenues missed the same.
The top line increased on a year-over-year basis while the bottom line remained stable. The company gained on strong underlying businesses as well as excellent bookings in the reported quarter.
Impressively, KBR’s board hiked its quarterly regular dividend by 11% from 13.5 cents per share to 15 cents, marking the fifth successive year of dividend increases. KBR will pay out its quarterly dividend on Apr 15, 2024, to shareholders on record as of Mar 15.
Additionally, the board authorized replenishment of its share repurchase authorization to $500 million.
Inside the Headlines
Adjusted earnings of 69 cents per share topped the consensus estimate of 68 cents by 1.5% and remained at par from a year ago.
Total revenues of $1.73 billion missed the consensus mark of $1.77 billion by 2.2% but grew 7.6% year over year. The upside was mainly driven by new and on-contract growth across Defense & Intel, Science & Space, and International within the Government Solutions unit and growing demand for the Sustainable Technology Solutions business.
Adjusted EBITDA increased 19.7% year over year to $188 million in the quarter. Adjusted EBITDA margin was up 110 basis points to 10.9%.
Segmental & Backlog Details
Revenues in the Government Solutions or GS segment increased 5.7% year over year to $1.33 billion. The upside was backed by new and on-contract growth across its businesses.
Adjusted EBITDA was $128 million, up from the prior-year quarter’s $118 million figure. Also, adjusted EBITDA margin of 9.6% grew 20 bps year over year. The segment benefited from the favorable international mix, excellent award fees and strong project execution.
Sustainable Technology Solutions' or STS revenues rose 14.2% year over year to $402 million, driven by increased sustainable services and technology.
Adjusted EBITDA increased to $85 million from $60 million a year ago. Adjusted EBITDA margin for the segment was up 310 basis points to 21.1%. This was attributable to a favorable revenue mix, the achievement of certain licensing milestones, joint venture performance and increased demand.
As of Dec 29, 2023, the total backlog (including award options of $4.4 billion) was $21.73 billion compared with $19.76 billion at 2022-end. Of the total backlog, Government Solutions booked $12.79 billion. The Sustainable Technology Solutions segment accounted for $4.55 billion of the total backlog.
At the end of 2023, the company delivered a trailing 12-month book-to-bill of 1.1x and recorded $10.5 billion in bookings and options.
2023 Highlights
Adjusted earnings came in at $2.91 per share, up from $2.71 a year ago. The upside was led by higher operating income, partially offset by higher interest expenses. Total revenues grew 6% year over year to $6.96 billion. Revenues excluding OAW also increased 11% on the back of new and on-contract growth across all GS businesses and growing demand across the STS segment.
Adjusted EBITDA increased 11.8% to $747 million from 2022. Adjusted EBITDA margin expanded 50 basis points to 10.7% from 2022.
Liquidity & Cash Flow
As of Dec 29, 2023, KBR’s cash and cash equivalents were $304 million, down from $389 million at 2022-end. Long-term debt was $1.8 million at the fourth quarter of 2023-end, down from $1.38 million at 2022-end.
In 2023, cash provided by operating activities totaled $331 million, down from $396 million in the year-ago period. It had an adjusted free cash flow of $383 million, up from $353 million a year ago.
2024 Guidance
KBR expects total revenues in the range of $7.4-$7.7 billion and an adjusted EBITDA between $810 and $850 million. Adjusted earnings per share is projected to be in the band of $3.10-$3.30. Operating cash flow is projected to be in the range of $450-$480 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, KBR has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, KBR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
KBR is part of the Zacks Engineering - R and D Services industry. Over the past month, Howmet (HWM), a stock from the same industry, has gained 6.3%. The company reported its results for the quarter ended December 2023 more than a month ago.
Howmet Aerospace reported revenues of $1.73 billion in the last reported quarter, representing a year-over-year change of +14.4%. EPS of $0.53 for the same period compares with $0.38 a year ago.
Howmet Aerospace is expected to post earnings of $0.52 per share for the current quarter, representing a year-over-year change of +23.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Howmet Aerospace. Also, the stock has a VGM Score of B.
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