Credit: Shutterstock photoKBR, Inc.KBR recently announced that the Australian Government has selected the NSI (Aust) Pty Ltd (NSI), a joint-venture company of Kellogg Brown & Root Pty Ltd (KBR) and Huntington Ingalls Industries Australia Pty Ltd HII , for setting up and managing the country's Naval Shipbuilding College (NSC). Estimated revenues related to this project will be booked as unfilled orders in the Government Services business segment.
About the Deal
As joint venture partners, KBR and Huntington will provide NSC with a complementary combination of attributes and industry workforce training experience. This will enable NSC to deliver the right workforce armed with efficient skills for the Naval Shipbuilding Program.
Also, NSI has brought together a team from various organizations across Australia. These organizations, which belong to education, academic, training and business sectors, are likely to complement KBR's and Huntington's industry and shipbuilding workforce development expertise. Notably, Australian Maritime College, PwC, Manpower Group, vocational education and training providers, Defence Teaming Centre as well as the Defence Industry Educational Skills Consortium are a part of this team.
Growth Drivers
KBR is banking on the strength of its Government Services business segment to optimize the company's growth potential. We note that KBR's optimism stems from healthy backlog levels that are expected to grow further. For instance, in the fourth quarter of 2017, this segment delivered impressive performance backed by organic growth and expansion of task orders on existing U.S. Government contracts. Going ahead, KBR expects all its key markets in the United States, the UK and Australia to perform exceedingly well driven by continued opportunities across the lifecycle of projects. Meanwhile, its long-term prospects remain strong, with an increasing portfolio of smaller and OpEx-facing projects, services, program management and maintenance contracts.
Furthermore, the company seems to be improving its growth potential and expanding market share through acquisition of companies or assets. In this context, KBR's acquisition of Honeywell Technology Solutions and Wyle are the notable ones.
KBR's consulting business is also experiencing increased activity, indicating lucrative opportunities in future Engineering and Construction project. In the past year, this Zacks Rank #3 (Hold) stock's shares have rallied 11.9% compared with the industry 's gain of 7.7%.
Headwinds
Prolonged softness in the Engineering and Construction segments over the past few quarters have been a pressing concern for the company. Also, volatility in the oil and gas markets along with oversupply might strain the prices and spending levels, consequently, affecting KBR's projects and orders in the quarters ahead.
Key Picks
Two better-ranked stocks from the same space are Fluor Corporation FLR and Willdan Group, Inc. WLDN . While Fluor sports a Zacks Rank #1 (Strong Buy), Willdan Group carries Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Fluor has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 8.4%.
Willdan Group has outpaced estimates in the preceding four quarters, with an average earnings surprise of 45.4%.
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Huntington Ingalls Industries, Inc. (HII): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
