KBR, Inc. (KBR) Bundle
Understanding KBR, Inc. (KBR) Revenue Streams
Understanding KBR, Inc.’s Revenue Streams
For the nine months ended September 27, 2024, KBR, Inc. reported total revenues of $5,620 million, reflecting an increase of $394 million or 8% compared to the same period in 2023, which had revenues of $5,226 million. This growth is attributed to various factors including high-end defense engineering, classified intelligence, and international programs within the Government Solutions (GS) business segment, as well as increased revenues from technology sales and engineering services in the Sustainable Technology Solutions (STS) business segment.
Breakdown of Primary Revenue Sources
The revenue sources for KBR can be categorized into two main segments:
- Government Solutions (GS)
- Sustainable Technology Solutions (STS)
For the nine months ended September 27, 2024, the revenues from each segment were as follows:
| Segment | Revenue (in millions) | Year-over-Year Change (in millions) | Percentage Change |
|---|---|---|---|
| Government Solutions | $4,273 | $248 | 6% |
| Sustainable Technology Solutions | $1,347 | $146 | 12% |
| Total | $5,620 | $394 | 8% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a healthy increase in KBR's financial performance:
- 2024: $5,620 million
- 2023: $5,226 million
- Growth Rate: 8%
Contribution of Different Business Segments to Overall Revenue
The contribution from different business segments to the overall revenue for the nine months ended September 27, 2024, is detailed below:
| Segment | Contribution to Total Revenue (in millions) | Percentage Contribution |
|---|---|---|
| Government Solutions | $4,273 | 76% |
| Sustainable Technology Solutions | $1,347 | 24% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- GS revenues increased primarily due to high-end defense engineering and classified intelligence.
- STS revenues benefited from increased technology sales and engineering services.
- The recent acquisition of LinQuest contributed $41 million in revenue during this period.
Overall, KBR has shown resilience and growth across its business segments, positioning itself well for future opportunities in both governmental and sustainable technology sectors.
A Deep Dive into KBR, Inc. (KBR) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 27, 2024, the gross profit was $810 million with a gross profit margin of 14.4%, up from $740 million and a margin of 14.2% for the same period in 2023. This reflects a 9% increase in gross profit year-over-year.
Operating Profit Margin: Operating income for the nine months ended September 27, 2024, was $520 million, yielding an operating profit margin of 9.3%, compared to $301 million and a margin of 5.8% for the nine months ended September 29, 2023. This represents a 73% increase in operating income.
Net Profit Margin: Net income attributable to the company for the nine months ended September 27, 2024, was $299 million, leading to a net profit margin of 5.3%. In contrast, the net income was a loss of $286 million for the nine months ended September 29, 2023, resulting in a negative margin of (5.5%).
Trends in Profitability Over Time
The following table summarizes the trends in profitability metrics over the past two fiscal years:
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Gross Profit | $810 million | $740 million | +9% |
| Operating Income | $520 million | $301 million | +73% |
| Net Income | $299 million | $(286 million) | +204% |
Comparison of Profitability Ratios with Industry Averages
The profitability ratios of the company compared to industry averages are as follows:
| Metric | Company (2024) | Industry Average | Difference |
|---|---|---|---|
| Gross Profit Margin | 14.4% | 15.0% | -0.6% |
| Operating Profit Margin | 9.3% | 8.5% | +0.8% |
| Net Profit Margin | 5.3% | 4.0% | +1.3% |
Analysis of Operational Efficiency
Operational efficiency is indicated through various metrics:
Cost Management: Selling, general, and administrative expenses increased by $20 million (5%) year-over-year, totaling $390 million for the nine months ended September 27, 2024.
Gross Margin Trends: The gross margin improved slightly from 14.2% in 2023 to 14.4% in 2024, indicating effective management of costs relative to revenue growth.
Equity in Earnings: Equity in earnings of unconsolidated affiliates rose to $97 million in 2024 from $78 million in 2023, reflecting a 24% increase.
Debt vs. Equity: How KBR, Inc. (KBR) Finances Its Growth
Debt vs. Equity: How KBR, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 27, 2024, KBR, Inc. reported total debt of $2,606 million, which includes $1,054 million in Term Loan A, $998 million in Term Loan B, $250 million in Senior Notes, and $330 million in Revolver. The current portion of long-term debt is $46 million, leaving a long-term debt balance of $2,560 million.
| Debt Type | Amount (in millions) |
|---|---|
| Term Loan A | $1,054 |
| Term Loan B | $998 |
| Senior Notes | $250 |
| Revolver | $330 |
| Total Debt | $2,606 |
Debt-to-Equity Ratio and Comparison to Industry Standards
KBR's debt-to-equity ratio stands at approximately 1.73 as of September 27, 2024, calculated by dividing total debt by total shareholders' equity of $1,514 million. This ratio is higher than the industry average of around 1.0, indicating a greater reliance on debt financing compared to equity.
Recent Debt Issuances and Credit Ratings
In January 2024, KBR entered into an amendment to its Credit Agreement, which provided for an incremental Term Loan B facility totaling $1 billion. This funding was aimed at refinancing existing debt and supporting the recent acquisition of LinQuest, which contributed to the overall increase in debt levels. The company has received a credit rating of Baa2 from Moody's and BBB from S&P, reflecting a stable outlook.
How the Company Balances Between Debt Financing and Equity Funding
KBR maintains a balanced approach to financing its operations and growth. The company utilizes debt for acquisitions and capital investments while also engaging in share repurchase programs, having repurchased 2,671,069 shares at an average price of $62.47 per share in 2024. This strategic balance helps KBR optimize its capital structure while pursuing growth opportunities.
| Financing Activity | Amount (in millions) |
|---|---|
| Total Share Repurchases in 2024 | $167 |
| Debt Issued in 2024 | $574 |
| Equity Raised through Share Issuance | $5 |
Assessing KBR, Inc. (KBR) Liquidity
Assessing KBR, Inc.'s Liquidity
Current Ratio: As of September 27, 2024, the current ratio is 1.19, calculated from current assets of $1,961 million and current liabilities of $1,653 million.
Quick Ratio: The quick ratio stands at 0.85, derived from quick assets (current assets minus inventory) divided by current liabilities.
Analysis of Working Capital Trends
Working capital for the nine months ended September 27, 2024, shows a positive trend with total current assets increasing from $1,651 million to $1,961 million. Current liabilities increased from $1,470 million to $1,653 million, resulting in an increase in net working capital from $181 million to $308 million.
| Metrics | September 27, 2024 | December 29, 2023 |
|---|---|---|
| Current Assets | $1,961 million | $1,651 million |
| Current Liabilities | $1,653 million | $1,470 million |
| Net Working Capital | $308 million | $181 million |
Cash Flow Statements Overview
Cash Flows from Operating Activities: For the nine months ended September 27, 2024, cash flows provided by operating activities totaled $422 million, compared to $248 million for the same period in 2023.
Cash Flows from Investing Activities: Cash used in investing activities amounted to ($751 million) for the nine months ended September 27, 2024, primarily due to the acquisition of LinQuest.
Cash Flows from Financing Activities: Cash provided by financing activities was $475 million for the nine months ended September 27, 2024, compared to cash used of ($250 million) in the prior year.
| Cash Flow Activities | September 27, 2024 | September 29, 2023 |
|---|---|---|
| Operating Activities | $422 million | $248 million |
| Investing Activities | ($751 million) | ($43 million) |
| Financing Activities | $475 million | ($250 million) |
| Net Increase (Decrease) in Cash | $158 million | ($41 million) |
Potential Liquidity Concerns or Strengths
As of September 27, 2024, cash and cash equivalents stood at $462 million, up from $304 million at the end of 2023. This indicates a strong liquidity position supported by a healthy cash flow from operations.
However, the significant cash outflow for investing activities related to acquisitions could pose a future liquidity concern if operational cash flows do not sustain the current growth rate.
Is KBR, Inc. (KBR) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial metrics, including the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and the Enterprise Value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a critical measure for evaluating relative valuation. As of September 27, 2024, the diluted earnings per share (EPS) was $2.22. The stock price as of the same date was approximately $64.05, leading to a P/E ratio of:
P/E Ratio = Stock Price / EPS = $64.05 / $2.22 = 28.84
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how the market values the company's net assets. The total shareholders' equity as of September 27, 2024, was $1,514 million. The number of shares outstanding was 134 million, resulting in a book value per share of:
Book Value per Share = Total Equity / Shares Outstanding = $1,514 million / 134 million = $11.29
Thus, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $64.05 / $11.29 = 5.67
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another important valuation metric. The enterprise value (EV) can be calculated as:
- Market Capitalization: $64.05 134 million = $8,584 million
- Total Debt: $2,052 million
- Cash and Cash Equivalents: $462 million
EV = Market Cap + Total Debt - Cash = $8,584 million + $2,052 million - $462 million = $10,174 million
Operating income for the nine months ended September 27, 2024, was $520 million. Assuming a similar ratio for EBITDA:
EBITDA = Operating Income + Depreciation and Amortization = $520 million + $112 million = $632 million
Thus, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $10,174 million / $632 million = 16.08
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations. The price ranged from a low of approximately $54.00 to a high of $66.00. The current price of $64.05 suggests a relatively stable position within this range.
Dividend Yield and Payout Ratios
The company declared dividends of $0.150 per share for Q3 2024. With the current stock price at $64.05, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = $0.150 4 / $64.05 = 0.0935 or 9.35%
The payout ratio based on the EPS of $2.22 is:
Payout Ratio = Dividends per Share / EPS = $0.150 / $2.22 = 6.76%
Analyst Consensus
As of September 2024, the consensus among analysts is predominantly a buy rating based on the company's strong performance and growth potential.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 28.84 |
| P/B Ratio | 5.67 |
| EV/EBITDA Ratio | 16.08 |
| Stock Price | $64.05 |
| Dividend Yield | 9.35% |
| Payout Ratio | 6.76% |
| Analyst Consensus | Buy |
Key Risks Facing KBR, Inc. (KBR)
Key Risks Facing KBR, Inc.
Industry Competition: The competitive landscape in the engineering and construction sector is intense. KBR, Inc. faces competition from both large multinational corporations and smaller specialized firms. As of September 27, 2024, the company's total backlog was approximately $17.9 billion, reflecting growth but also highlighting the pressure to maintain market share against competitors with similar capabilities.
Regulatory Changes: Changes in regulations, particularly those related to government contracts and environmental standards, pose significant risks. Non-compliance with federal regulations can lead to penalties and affect contract eligibility. The effective tax rate for the nine months ended September 27, 2024, was 26%, compared to (32)% for the same period in 2023, which indicates an evolving regulatory environment that could impact financial performance.
Market Conditions: Economic fluctuations can adversely affect demand for KBR's services. For instance, the company reported revenues of $5.62 billion for the nine months ended September 27, 2024, an increase of 8% compared to the prior year, driven by defense and technology sectors. However, reliance on government contracts makes it vulnerable to budget cuts and changes in government spending priorities.
Operational Risks
Project Execution: Delays in project execution can lead to cost overruns and reduced profitability. KBR reported a 10% increase in selling, general, and administrative expenses, totaling $390 million for the nine months ended September 27, 2024, partially due to increased operational demands. Furthermore, $101 million of the backlog was related to active contracts in a loss position, indicating potential challenges in project management.
Financial Risks: The company has significant debt obligations, with long-term debt reported at $2.56 billion as of September 27, 2024. The increase in interest expense to $100 million for the nine months ended September 27, 2024, reflects higher borrowing costs due to rising interest rates. This financial leverage can strain cash flows, particularly if revenue growth slows.
Strategic Risks
Acquisitions and Integrations: The recent acquisition of LinQuest contributed $41 million to revenue but also presents integration risks. The company's ability to effectively merge operations and retain key talent from acquired firms is crucial for sustaining growth. The company recorded net income of $299 million for the nine months ended September 27, 2024, a significant recovery from a net loss of $286 million in the previous year, indicating potential benefits from strategic decisions but also exposing the company to integration challenges.
Mitigation Strategies: KBR has implemented several strategies to mitigate risks, including diversifying its project portfolio and enhancing operational efficiencies. As of September 27, 2024, the company had a cash and cash equivalents balance of $462 million, which provides liquidity to navigate potential downturns and invest in growth opportunities.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Pressure from competitors in the engineering sector | Backlog of $17.9 billion |
| Regulatory Changes | Potential penalties from non-compliance | Effective tax rate of 26% |
| Market Conditions | Economic fluctuations impacting demand | Revenue of $5.62 billion, 8% increase |
| Project Execution | Delays leading to cost overruns | SG&A expenses of $390 million |
| Financial Risks | High debt obligations affecting cash flow | Long-term debt of $2.56 billion |
| Acquisitions and Integrations | Challenges in merging operations | Net income of $299 million |
| Mitigation Strategies | Diversification and operational efficiencies | Cash balance of $462 million |
Future Growth Prospects for KBR, Inc. (KBR)
Future Growth Prospects for KBR, Inc.
Growth opportunities for KBR, Inc. are driven by several key factors, including product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- Product Innovations: KBR is focusing on technology advancements in sustainable solutions, particularly within their Sustainable Technology Solutions (STS) segment, which saw revenues increase by $146 million, or 12%, to $1,347 million for the nine months ended September 27, 2024.
- Market Expansions: The company is expanding its presence in the defense sector, with revenues from Government Solutions (GS) increasing by $248 million, or 6%, totaling $4,273 million for the same period.
- Acquisitions: The acquisition of LinQuest contributed an additional $41 million in revenue.
Future Revenue Growth Projections
Forecasts indicate that KBR's overall revenues are projected to grow to $6 billion by 2025, bolstered by continued demand in defense and sustainable technologies.
Earnings Estimates
Earnings estimates reflect a significant turnaround, with net income attributable to KBR reaching $299 million for the nine months ended September 27, 2024, compared to a net loss of $286 million in the same period of 2023. The earnings per share (EPS) for the same period is estimated at $2.22.
Strategic Initiatives and Partnerships
- Strategic Initiatives: KBR is enhancing its operational capabilities through investments in advanced technologies and expanding its portfolio in high-end defense engineering.
- Partnerships: Collaborations with government and private sectors to develop innovative solutions in energy and national defense are expected to drive growth.
Competitive Advantages
KBR's competitive advantages include a robust backlog of $17.9 billion, with 36% expected to be executed within one year. This backlog is supported by a diverse mix of fixed-price, cost-reimbursable, and time-and-material contracts, ensuring steady revenue streams.
| Metric | Value |
|---|---|
| Total Revenues (2024) | $5,620 million |
| Net Income (2024) | $299 million |
| EPS (2024) | $2.22 |
| Backlog | $17.9 billion |
| Revenue Growth (STS) | 12% |
| Revenue Growth (GS) | 6% |
In summary, KBR, Inc. is well-positioned for future growth through its strategic initiatives, strong financial performance, and competitive advantages in the market.
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Article updated on 8 Nov 2024
Resources:
- KBR, Inc. (KBR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of KBR, Inc. (KBR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View KBR, Inc. (KBR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.