Government and sustainable technology solutions company KBR (NYSE: KBR) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 13% year on year to $2.06 billion. On the other hand, the company’s full-year revenue guidance of $8.9 billion at the midpoint came in 0.8% above analysts’ estimates. Its non-GAAP profit of $0.98 per share was 13.7% above analysts’ consensus estimates.
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KBR (KBR) Q1 CY2025 Highlights:
- Revenue: $2.06 billion vs analyst estimates of $2.08 billion (13% year-on-year growth, 1.4% miss)
- Adjusted EPS: $0.98 vs analyst estimates of $0.86 (13.7% beat)
- Adjusted EBITDA: $243 million vs analyst estimates of $227.7 million (11.8% margin, 6.7% beat)
- The company reconfirmed its revenue guidance for the full year of $8.9 billion at the midpoint
- Management reiterated its full-year Adjusted EPS guidance of $3.83 at the midpoint
- EBITDA guidance for the full year is $970 million at the midpoint, in line with analyst expectations
- Operating Margin: 9.5%, in line with the same quarter last year
- Free Cash Flow Margin: 4.3%, similar to the same quarter last year
- Backlog: $17.29 billion at quarter end, in line with the same quarter last year
- Market Capitalization: $7.28 billion
StockStory’s Take
KBR’s first quarter results reflected double-digit year-on-year revenue growth, with management highlighting continued execution of its strategy and contract wins in both Mission Technology Solutions (MTS) and Sustainable Technology Solutions (STS). CEO Stuart Bradie emphasized the contribution from the LinQuest acquisition and robust operational performance in projects like Plaquemines LNG, stating, “Our financial performance this quarter has been strong due to the successful delivery of key project milestones.”
Looking ahead, management reaffirmed its full-year revenue and profit guidance, citing expectations for steady demand in government services and sustainable technology markets. Bradie maintained confidence in the company’s outlook, referencing a diversified backlog and proactive cost controls. CFO Mark Sopp reiterated that 2025 assumptions remain unchanged, saying, “We are maintaining a disciplined approach to capital allocation, acting on our share buyback authorization and returning capital to shareholders.”
Key Insights from Management’s Remarks
KBR’s leadership discussed several factors underpinning first quarter results and set the stage for the rest of the year. The quarter was shaped by ongoing contract execution, strategic acquisitions, and a balanced mix of government and energy transition projects.
• HomeSafe Program Progress: The HomeSafe contract continued to ramp up, with management noting improved customer satisfaction and operational performance. Bradie highlighted rising satisfaction scores—approaching 90%—and credited technology adoption and enhanced customer care for the improvement.
• Plaquemines LNG Milestones: The Plaquemines LNG project delivered key milestones, contributing to STS margin expansion. Management attributed this to KBR’s joint venture execution and its ability to manage complex, large-scale energy projects.
• LinQuest Integration: The LinQuest acquisition integration is largely complete, enabling KBR to secure new contracts, particularly in digital engineering for the U.S. space sector. The Ascent 2 award with the US Space Force exemplified the synergy from this acquisition.
• Diverse Backlog and International Growth: The company reported new contract wins across defense, energy, and infrastructure, including increased activity in regions such as the Middle East, Indonesia, and Australia. This geographic and end-market diversity helped offset potential slowdowns in specific segments.
• Balanced Exposure to Industry Trends: Management addressed shifts from energy transition to energy security in some markets (notably the Middle East), while noting ongoing momentum in energy transition projects in Europe. This adaptability, paired with asset-light operations, positioned KBR to navigate macroeconomic uncertainties.
Drivers of Future Performance
Management’s outlook for the remainder of 2025 centers on diversified contract backlog, continued demand in core government and energy markets, and disciplined cost management.
• Government and Defense Spending: Management believes expanding U.S. defense budgets and long-term international contracts in the U.K. and Australia will underpin steady growth in government services.
• Energy Security and Transition Projects: The company expects global demand for LNG and sustainable technology projects to support growth, particularly as customers in some regions prioritize energy security over transition initiatives.
• Operational Flexibility and Cost Control: KBR’s asset-light, capital-efficient model and proactive cost controls are expected to help manage risks from economic slowdowns or changes in customer capital expenditures.
Top Analyst Questions
• Andy Kaplowitz (Citigroup): Asked about potential delays in energy transition projects and regional strength; management replied that while some regions are prioritizing energy security, Europe maintains focus on transition, and the STS portfolio is balanced to adapt.
• Steven Fisher (UBS): Questioned the status of government contract awards under protest and HomeSafe ramp; management explained that $2 billion in awards remain under protest but expects resolution later this year, and HomeSafe volumes will rise in the second half.
• Michael Dudas (Vertical Research): Inquired about LNG project capacity and Brown & Root joint venture; Bradie responded that global LNG activity remains high, and the Brown & Root venture is expanding into new operational markets.
• Samantha Stiroh (BofA): Asked about international MTS growth and M&A strategy; management highlighted long-term contracts in the U.K. and Australia and a focus on bolt-on acquisitions in strategic verticals like digital engineering and sustainability.
• Jerry Revich (Goldman Sachs): Requested more details on HomeSafe customer satisfaction and vendor adoption; Bradie noted satisfaction near 90% and ongoing efforts to train and onboard suppliers as the program scales.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will monitor (1) the pace and scale of HomeSafe’s seasonal ramp and its impact on segment growth, (2) resolution of government contract protests and subsequent bookings activity in MTS, and (3) continued execution and milestone delivery in LNG and international sustainable technology projects. Progress in these areas will be key for evaluating KBR’s ability to achieve its 2025 targets.
KBR currently trades at a forward P/E ratio of 14.6×. In the wake of earnings, is it a buy or sell? The answer lies in our free research report.
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