1. No category

March 15, 2015
NYSE: KBR
KBR INC
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
$0.32
B-
C+
C
Annual Dividend Yield
2.12%
SELL
C-
D
Beta
1.38
Sector: Industrials
KBR BUSINESS DESCRIPTION
KBR, Inc. operates as an engineering, construction,
and services company worldwide. The company
operates through three segments: Technology &
Consulting, Engineering & Construction, and
Government Services.
D+
D-
E+
E
E-
F
Market Capitalization
$2.2 Billion
Sub-Industry: Construction & Engineering
Weekly Price: (US$)
SMA (50)
SELL
52-Week Range
$14.65-$28.42
RATING SINCE
03/10/2015
Price as of 3/12/2015
$15.05
Source: S&P
SMA (100)
1 Year
2 Years
38
35
33
30
28
STOCK PERFORMANCE (%)
3 Mo.
Price Change
-1.38
1 Yr.
-45.67
25
3 Yr (Ann)
-25.16
23
20
GROWTH (%)
Last Qtr
-15.66
-2,116.07
-2,155.26
12 Mo.
-11.76
-1,782.66
-1,842.00
3 Yr CAGR
-11.24
NA
NA
RETURN ON EQUITY (%)
KBR
Q4 2014
-133.97
Q4 2013
3.04
Q4 2012
5.66
Ind Avg
10.48
13.69
11.29
S&P 500
14.59
13.97
13.23
Revenues
Net Income
EPS
18
15
Rating History
HOLD
BUY
HOLD
BUY
HOLD
Volume in Millions
25
2014
0
2015
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
P/E COMPARISON
RECOMMENDATION
We rate KBR INC (KBR) a SELL. This is driven by a few notable weaknesses, which we believe should have a
greater impact than any strengths, and could make it more difficult for investors to achieve positive results
compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such
as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally
disappointing historical performance in the stock itself and feeble growth in its earnings per share.
n/m
18.49
19.50
KBR
Ind Avg
S&P 500
HIGHLIGHTS
The company, on the basis of change in net income from the same quarter one year ago, has significantly
underperformed when compared to that of the S&P 500 and the Construction & Engineering industry. The net
income has significantly decreased by 2116.1% when compared to the same quarter one year ago, falling
from -$56.00 million to -$1,241.00 million.
Q3 0.21
Q4 -8.57
Q2 -0.06
Q1 -0.29
Q4 -0.38
Q2 0.61
Q3 -0.32
Q1 0.59
Q4 0.20
Q3 -0.55
Q2 0.70
Q1 0.61
EPS ANALYSIS¹ ($)
Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This
is a signal of major weakness within the corporation. Compared to other companies in the Construction &
Engineering industry and the overall market, KBR INC's return on equity significantly trails that of both the
industry average and the S&P 500.
Net operating cash flow has significantly decreased to -$8.00 million or 103.70% when compared to the same
quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
2012
2013
2014
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the
last year: it has tumbled by 45.67%, worse than the S&P 500's performance. Consistent with the plunge in the
stock price, the company's earnings per share are down 2155.26% compared to the year-earlier quarter.
Turning toward the future, the fact that the stock has come down in price over the past year should not
necessarily be interpreted as a negative; it could be one of the factors that may help make the stock
attractive down the road. Right now, however, we believe that it is too soon to buy.
KBR INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to
its performance from the same quarter a year ago. The company has reported a trend of declining earnings
per share over the past two years. However, the consensus estimate suggests that this trend should reverse
in the coming year. During the past fiscal year, KBR INC swung to a loss, reporting -$8.71 versus $0.50 in the
prior year. This year, the market expects an improvement in earnings ($1.10 versus -$8.71).
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: March 15, 2015
PAGE 1
March 15, 2015
NYSE: KBR
KBR INC
Sector: Industrials Construction & Engineering Source: S&P
Annual Dividend Rate
$0.32
Annual Dividend Yield
2.12%
PEER GROUP ANALYSIS
35%
ACM
V
FA
AB
OR
R
VO
FA
GRAM
MTZ
DY
GVA
LE
AB
-15%
UN
Revenue Growth (TTM)
LE
PWR
CBI
KBR
-15%
Market Capitalization
$2.2 Billion
52-Week Range
$14.65-$28.42
Price as of 3/12/2015
$15.05
INDUSTRY ANALYSIS
The Construction & Engineering industry includes firms that design, manufacture and install products for the
residential & commercial construction and automotive markets. The industry is cyclical in nature, driven by
the overall health of the US economy. The level of new construction, renovation and re-sales of houses,
interest rate environment, labor costs and the cost of raw materials are predominant factors influencing
growth.
REVENUE GROWTH AND EBITDA MARGIN*
TPC
JEC
EME
Beta
1.38
The US real estate market witnessed dramatic expansion, which translated into radical growth for the
building products industry. The strength of the residential market led to a robust M&A environment. However,
since the market collapsed, building activity slowed and the industry was sent into turmoil. Nevertheless,
worldwide demand for building products is still strong, led by growth in emerging economies and the U.S. real
estate market is slowly recovering.
Existing home sales in the US plummeted as the sub-prime mortgage crisis dragged down the value and
demand for housing. After rising for many years, prices of existing houses that witnessed a sharp decline
since the beginning of 2007, a bottoming in 2010, have modestly rebounded. The combination of a slowly
improving economy and tight credit has resulted in existing home sales continuing to slowly recover. These
factors significantly influence building products demand.
15%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $1.1 Billion and $5.7 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
New home starts and permits also slowed considerably during the real estate recession. Excess office and
retail space weaken demand for new non-residential construction.
International demand for engineering remains steady, enabling companies with exposure to foreign markets
to withstand the effects of the US housing market. Building products sub-sectors face challenges from high
shipping costs and timely delivery of products. However, volatility in the housing market, tepid consumer
spending and uncertainty in the US economy are bound to effect spending in the home improvement and auto
markets in the foreseeable future. Also, the rise in the cost of raw materials, driven by higher energy prices
and labor costs, will likely hurt profit margins.
REVENUE GROWTH AND EARNINGS YIELD
35%
PEER GROUP: Construction & Engineering
ACM
V
FA
AB
OR
LE
PWR
CBI
DY
R
VO
FA
KBR
-60%
TPC
MTZ
JEC
EME
GVA
LE
AB
-15%
UN
Revenue Growth (TTM)
GRAM
20%
Earnings Yield (TTM)
Ticker
KBR
PWR
JEC
CBI
ACM
EME
MTZ
DY
GVA
GRAM
TPC
Recent
Company Name
Price ($)
KBR INC
15.05
QUANTA SERVICES INC
28.14
JACOBS ENGINEERING GROUP IN 43.63
CHICAGO BRIDGE & IRON CO
47.28
AECOM INC
29.58
EMCOR GROUP INC
45.10
MASTEC INC
20.25
DYCOM INDUSTRIES INC
45.13
GRANITE CONSTRUCTION INC
33.13
GRANA Y MONTERO SA
8.67
TUTOR PERINI CORP
21.66
Market
Cap ($M)
2,180
5,744
5,598
5,107
4,599
2,840
1,658
1,535
1,298
1,145
1,054
Price/
Earnings
NM
20.84
17.18
9.49
29.00
17.48
14.26
28.93
53.44
11.12
9.85
Net Sales
TTM ($M)
6,366.00
7,851.25
12,813.27
12,974.93
10,588.94
6,424.97
4,614.84
1,859.83
2,275.27
2,393.46
4,492.31
Net Income
TTM ($M)
-1,262.00
296.71
334.46
543.61
69.96
168.66
115.64
54.62
25.35
102.33
107.94
The peer group comparison is based on Major Construction & Engineering companies of comparable size.
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -11.8% and
30.9%. Companies with NA or NM values do not
appear.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: March 15, 2015
PAGE 2
March 15, 2015
NYSE: KBR
KBR INC
Sector: Industrials Construction & Engineering Source: S&P
Annual Dividend Rate
$0.32
Annual Dividend Yield
2.12%
Beta
1.38
Market Capitalization
$2.2 Billion
52-Week Range
$14.65-$28.42
Price as of 3/12/2015
$15.05
COMPANY DESCRIPTION
KBR, Inc. operates as an engineering, construction, and
services company worldwide. The company operates
through three segments: Technology & Consulting,
Engineering & Construction, and Government Services.
The Technology & Consulting segment offers various
services and solutions, including licensing, engineering
and design, proprietary equipment, plant automation,
catalysts, and related consulting services to
hydrocarbons, chemicals, and fertilizer markets. This
segment provides field development and planning,
technology selection and optimization of capital
spending, offshore integrity management, and structural
analysis for production platforms; and feasibility and
revamp studies, as well as planning activities related to
the development and construction of refining,
petrochemical, chemical, and fertilizer complexes. This
segment also offers technology related services to
semi-submersible hull design and monohull vessels, as
well as drillship and floating production, storage, and
offshore vessels; technologies for conversion of heavy
hydrocarbon streams to fuels in the refining markets, and
technologies for the conversion and production of
olefins; and ammonia process technology solutions for
the ammonia and fertilizer markets, as well as clean coal
gasification technology. The Engineering & Construction
segment provides engineering and EPC services for the
development, construction, and commissioning of
projects in the offshore, onshore and liquefied natural
gas, and gas-to-liquids markets; and liquefaction,
regasification, floating LNG, and floating storage and
regasification units. The Government Services segment
offers construction, refurbishment, operations and
maintenance of housing, and other facilities for military
personnel, as well as operations support, embassy and
other life support programs, heavy equipment
transportation, and police facilities management
integration services. KBR, Inc. was founded in 1901 and
is headquartered in Houston, Texas.
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of KBR shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
KBR INC
601 Jefferson Street, Suite 3400
Houston, TX 77002
USA
Phone: 713-753-3011
http://www.kbr.com
THESTREET RATINGS RESEARCH METHODOLOGY
FACTOR
SCORE
0.5
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, KBR has a growth score better than virtually
none of the stocks we rate
strong
0.5
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company ranks at the bottom of the companies we
cover.
strong
0.5
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company ranks at the bottom of companies we
review for income generated per dollar of capital.
strong
1.0
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 10% of the stocks we monitor.
strong
2.0
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 30% of the companies we analyze.
strong
4.0
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. The company's
dividend is higher than 70% of the companies we track.
strong
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: March 15, 2015
PAGE 3
March 15, 2015
NYSE: KBR
KBR INC
Sector: Industrials Construction & Engineering Source: S&P
Annual Dividend Rate
$0.32
Annual Dividend Yield
2.12%
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.17
Q1 FY15
1.10 E
1.30 E
2015(E)
2016(E)
Market Capitalization
$2.2 Billion
52-Week Range
$14.65-$28.42
Price as of 3/12/2015
$15.05
FINANCIAL ANALYSIS
KBR INC's gross profit margin for the fourth quarter of its fiscal year 2014 has significantly decreased when
compared to the same period a year ago. Sales and net income have dropped, although the growth in
revenues underperformed the average competitor within the industry, the net income growth did not. KBR
INC has average liquidity. Currently, the Quick Ratio is 1.16 which shows that technically this company has
the ability to cover short-term cash needs. The company's liquidity has decreased from the same period last
year, indicating deteriorating cash flow.
At the same time, stockholders' equity ("net worth") has significantly decreased by 61.75% from the same
quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the
company will face financial difficulties in the near future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Beta
1.38
Q4 FY14
1,417.00
-206.00
-223.00
-1,241.00
Q4 FY13
1,680.00
-41.00
-60.00
-56.00
Q4 FY14
987.00
4,199.00
73.00
942.00
Q4 FY13
1,107.00
5,438.00
88.00
2,463.00
Q4 FY14
-10.23%
-14.53%
-15.74%
1.52
-30.05%
-133.97%
Q4 FY13
1.55%
-2.44%
-3.57%
1.33
1.37%
3.04%
Q4 FY14
1.26
0.07
NA
NA
Q4 FY13
1.53
0.03
2.00
-30.00
Q4 FY14
145
0.08
-8.57
6.50
NA
2,250,946
Q4 FY13
148
0.08
-0.38
16.62
NA
2,201,340
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: March 15, 2015
PAGE 4
March 15, 2015
NYSE: KBR
KBR INC
Sector: Industrials Construction & Engineering Source: S&P
Annual Dividend Rate
$0.32
Annual Dividend Yield
2.12%
RATINGS HISTORY
Our rating for KBR INC was recently downgraded
from Hold to Sell on 3/10/2015. As of 3/12/2015, the
stock was trading at a price of $15.05 which is
47.1% below its 52-week high of $28.42 and 2.7%
above its 52-week low of $14.65.
SELL: $14.99
BUY: $34.32
HOLD: $29.87
HOLD: $30.70
BUY: $31.20
HOLD: $31.24
2 Year Chart
$30
To
Sell
Hold
Buy
Hold
Buy
Hold
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
(as of 3/12/2015)
47.24% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
29.44% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
23.32% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
2
3
Price as of 3/12/2015
$15.05
4
5
KBR NM
Peers 18.49
• Neutral. The absence of a valid P/E ratio happens
when a stock can not be valued on the basis of a
negative stream of earnings.
• KBR's P/E is negative making this valuation
measure meaningless.
1
2
3
4
5
1
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
KBR NA
Peers 7.47
• Neutral. The PEG ratio is the stock’s P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• Ratio not available.
Earnings Growth
1
2
3
4
lower
5
higher
KBR -1842.00
Peers -82.25
• Lower. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• However, KBR is expected to significantly trail its
peers on the basis of its earnings growth rate.
Sales Growth
discount
KBR 0.34
Peers 0.47
• Discount. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• KBR is trading at a significant discount to its
industry on this measurement.
3
KBR 12.82
Peers 25.20
• Discount. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• KBR is trading at a significant discount to its peers.
discount
KBR 2.31
Peers 1.81
• Premium. A higher price-to-book ratio makes a
stock less attractive to investors seeking stocks
with lower market values per dollar of equity on the
balance sheet.
• KBR is trading at a significant premium to its peers.
2
premium
discount
KBR 11.58
Peers 13.48
• Average. An average price-to-projected earnings
ratio can signify an industry neutral stock price and
average future growth expectations.
• KBR is trading at a valuation on par with its peers.
Price/Book
1
Price/CashFlow
discount
premium
Price reflects the closing price as of the date listed, if available
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
1
premium
Price/Projected Earnings
From
Hold
Buy
Hold
Buy
Hold
Hold
52-Week Range
$14.65-$28.42
VALUATION
SELL. This stock’s P/E ratio is negative, making its value useless in the assessment of premium or discount
valuation, only displaying that the company has negative earnings per share. Conducting a second
comparison, its price-to-book ratio of 2.31 indicates a discount versus the S&P 500 average of 2.75 and a
premium versus the industry average of 1.81. The current price-to-sales ratio is well below the S&P 500
average and is also below the industry average, indicating a discount. After reviewing these and other key
valuation criteria, KBR INC proves to trade at a premium to investment alternatives within the industry.
Price/Earnings
2014
MOST RECENT RATINGS CHANGES
Date
Price
Action
3/10/15
$14.99 Downgrade
12/18/13
$29.87 Downgrade
10/28/13
$34.32
Upgrade
8/8/13
$30.70 Downgrade
5/13/13
$31.20
Upgrade
3/12/13
$31.24 No Change
Market Capitalization
$2.2 Billion
$40
$20
2013
Beta
1.38
1
2
3
lower
4
5
higher
KBR -11.76
Peers 5.20
• Lower. A sales growth rate that trails the industry
implies that a company is losing market share.
• KBR significantly trails its peers on the basis of
sales growth
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: March 15, 2015
PAGE 5