KBR 3Q falls with less work in government, Iraq

posted: 28 DAYS 3 HOURS AGO

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HOUSTON -Engineering and construction company KBR Inc. said Thursday its third-quarter profit fell 14 percent as revenue declined in its biggest business, government and infrastructure, and in its military work in Iraq as the U.S. has fewer projects there.

Net income of $73 million, or 45 cents per share, was down from $85 million, or 51 cents per share, in the same quarter last year. Analysts surveyed by Thomson Reuters expected earnings of 41 cents per share.

Revenue for the quarter ended Sept. 30 was $2.84 billion, down 6 percent from $3.02 billion in the same three months of 2008.

Analysts expected revenue of $2.92 billion.

Shares fell in afternoon trading.

Revenue at KBR's government and infrastructure business fell 28 percent, to $1.38 billion from $1.76 billion.

Bill Utt, chairman, president and CEO, said revenue for the Army's Logistics Civil Augmentation Program, or Logcap, was down 15 percent in the quarter, "consistent with reduced activity levels in Iraq."

On Monday, Stifel, Nicolaus downgraded KBR to "Hold" from "Buy" on an assessment that profit could decline significantly this year as the U.S. military becomes less active in Iraq.

Backlog at the end of September was $13.5 billion, up 9 percent from the second quarter with "no material project cancellations" during the quarter, KBR said.

Barclay's Capital analyst Andy Kaplowitz said investors do not see any major projects on the horizon and are avoiding KBR.

"People just don't like the fact there aren't any near-term catalysts for the stock," he said. "It seems like the next large catalysts are not until next year."

In addition, investors are nervous that KBR could lose more military work in Iraq, Kaplowitz said. But even if it does, the impact won't be felt until the end of 2010 because the government moves slowly, he said. And Wall Street already has accounted for lower revenue from Iraq work, Kaplowitz said.

"I think people are overreacting," he said.

Analyst Heiko Ihle of Gabelli & Co. said he is "slightly surprised" the stock fell.

KBR's government and infrastructure business, which handles military work, has "always been the overhang of that stock," he said. "This quarter was no exception."

Shares fell 66 cents, or 3 percent, to $20.55 in afternoon trading.

2009-10-29 16:04:54