KBR - Value
September 11 2011 - 8:00PM
Zacks
Infrastructure and growth in the oil and gas sector are hot topics.
KBR (KBR) could be in line to cash in from big projects in
both areas. This Zacks #1 Rank (strong buy) is a value stock with a
forward P/E of just 11.
KBR provides engineering and construction services
to the energy, petrochemical and government sectors.
It is an especially big player in the natural gas
industry, having designed and constructed, by itself or with
partners, more than half of the world's operating liquefied natural
gas (LNG) production capacity over the last 30 years.
KBR Surprised By 23% in the Second
Quarter
On July 27, KBR reported its second quarter results
and surprised on the Zacks Consensus for the 5th quarter in a row.
Earnings per share were 65 cents compared to the consensus of 53
cents. It made 66 cents in the year ago quarter.
Consolidated revenue actually declined to $2.5
billion from $2.7 billion in the second quarter of 2010.
However, the company's largest Business Unit, the
Hydrocarbons business group, saw revenue rise 10% to $1.1
billion.
The backlog also increased over the prior quarter
in most of the Business Units.
Raised Full Year Guidance
Given the stronger than expected operating
performance and control over general and administrative expenses,
KBR raised its full year guidance to a range of $2.60 to $2.85 from
its January guidance of $2.05 to $2.30.
Zacks Consensus Estimates Rise
Analysts raised estimates for the full year after
the company's bullish EPS guidance revision.
The 2011 Zacks Consensus Estimate jumped to $2.69
from $2.37 per share over the last 2 months.
That is earnings growth of 30% compared to the
$2.07 the company made in 2010.
Sell Off Has Made the Shares More
Attractive
Shares of KBR had been on a 2-year tear until the
recent stock market sell off.
With rising earnings estimates and a falling share
price, KBR has even more attractive valuations.
In addition to a low P/E, the company has a
price-to-sales ratio of only 0.5. A P/S ratio under 1.0 usually
means a company is undervalued.
Its price-to-book ratio of 1.9 also indicates value
as a P/B ratio under 3.0 more often than not indicates "value."
KBR also rewards shareholders in 2 ways.
On Aug 26, KBR also announced the Board had
authorized a 10 million share repurchase program. The company also
pays a dividend, currently yielding 0.7%.
The raising of earnings guidance for the full year
in July was an optimistic signal that this infrastructure company
was betting on growth, instead of recession.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her at
twitter.com/traceyryniec.
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