KBR, Inc: Big engineering, at work around the world

A number of engineering firms are described as "leading global providers of service." Few are as entitled to that description as a Houston outfit that is particularly noted for its work in the energy and government service arenas.

KBR, Inc. (NYSE: KBR) is an engineering, construction, and services company supporting the energy, petrochemical, government and civil infrastructure sectors. Its Energy and Chemicals unit designs and constructs onshore and offshore oil and gas production facilities, pipelines, liquefied natural gas (LNG) facilities, refineries and petrochemical plants. The Government and Infrastructure unit provides program management, contingency logistics, operations and maintenance, construction management, and engineering to military and civilian branches of governments and private customers. The Ventures unit helps to finance and manage entities to which the other units are providing services. Halliburton Co. (NYSE: HAL) spun off about 20% of KBR through a 2006 IPO and divested the rest earlier this year.

The firm got some good news earlier in the week, when it was awarded a $2.8 billion engineering, procurement and construction contract for the Sonatrach Skikda LNG project, to be constructed at Skikda, Algeria. The share price popped on the news and has since been consolidating the gain in a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy," one "buy" and four "holds." Analysts see a 29% growth rate, through the next year. The KBR Price to Sales ratio (0.54), Price to Book ratio (2.86), Price to Free Cash Flow ratio (4.12) and EPS Growth rate (21.43%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 40 percent of the outstanding shares. Since going public last November 16th, the stock has traded between $19.66 and $31.91. A stop-loss of $27.40 looks good here. Note that the firm is next expected to report quarterly results on August 2nd.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.