KBR, INC. (KBR)·Q1 2026 Earnings Summary

Executive Summary

• Q1 2026 source documents (8‑K 2.02, press release, and call transcript) were not present in the document catalog; this recap anchors on S&P Global consensus for Q1 2026 and KBR’s Q2–Q3 2025 results and guidance. Consensus for Q1 2026: EPS $0.98*, Revenue $1.96B*, EBITDA $239.7M*, based on 5 estimates each*.
• KBR delivered margin-led performance in Q3 2025: Adjusted EBITDA $240M (+10% YoY) with 12.4% margin and Adjusted EPS $1.02 (+21% YoY); book-to-bill 1.4x and backlog plus options rose to $23.4B, signaling pipeline strength .
• FY 2025 revenue guidance was lowered to $7.75B–$7.85B (from $7.9B–$8.1B), while Adjusted EBITDA ($960M–$980M), Adjusted EPS ($3.78–$3.88), and Operating Cash Flow ($500M–$550M) were maintained, reflecting resilience despite award delays and shutdown impacts .
• Strategic MTS spin-off remains on track for mid‑to‑late 2026, creating two pure‑play profiles; >60% of Adjusted EBITDA comes from non‑U.S. government customers, mitigating shutdown risk .

What Went Well and What Went Wrong

What Went Well

• Margin expansion and cash conversion: Adjusted EBITDA margin rose to 12.4% and operating cash conversion hit 152% in Q3 2025; “Cash was the standout in the quarter,” management emphasized .
• STS margin strength: STS Adjusted EBITDA of $123M (+13% YoY) with 23.4% margin, aided by strong LNG equity earnings; CFO highlighted milestone progression on Plaquemines LNG .
• Commercial momentum: Book-to-bill 1.4x in Q3 and backlog+options climbed to $23.4B; MTS backlog+options reached $19.7B, underpinned by wins across NASA, AFRL, and Space Force .

What Went Wrong

• Revenue growth headwinds: Q3 2025 revenue was flat YoY due to slower award conversion, EUCOM reductions in Readiness & Sustainment, and NASA funding constraints .
• Government shutdown impact: Management flagged delayed award decisions and protest resolutions, creating conversion slippage and modestly lowering near‑term MTS outlook; revenue guidance cut while profit metrics held .
• STS bookings timing: Softness in new awards and deferrals earlier in 2025 required pivot to geographies and energy affordability vectors; conversion challenges impacted revenue trajectory .

Financial Results

Segment breakdown:

KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Adjusted EBITDA margins were up more than 100 basis points year on year at 12.4%, delivering an adjusted EBITDA of $240 million… adjusted EPS of $1.02, an increase of 21% year over year… Cash was the standout in the quarter… $198 million in the quarter and $506 million year to date” – CEO Stuart Bradie .
• “STS… Adjusted EBITDA came in at $123 million, up 13%… continued strong contribution from Plaquemines LNG coming through in equity in earnings… We advanced more milestones… expect Q4 to look more normative” – CFO Mark Sopp .
• “We now have $3 billion in awards which we have won but cannot book or start until the protest clears… lowers our outlook for MTS in the fourth quarter” – CFO Mark Sopp .
• “We are spinning off our Mission Technologies segment… targeting completion by mid‑to‑late 2026” – CEO Stuart Bradie .

Q&A Highlights

• STS trajectory into 2026: Management expects continued momentum aligned with long‑term CAGRs; ammonia (fertilizer), LNG, and energy affordability are focus areas; Mura Hydro‑PRT commissioning now expected in Q1, with investor interest ongoing .
• MTS mix and strength: Defense & Intel growth offsets weaker NASA and R&S; international (UK/Australia) performing well; protested wins (e.g., APS2) awaiting work orders due to shutdown .
• NASA exposure: Near‑term impact minimal under shutdown; potential budget pressures focused on science, with human performance and Artemis work supported; overall bottom‑line exposure limited .
• LNG outlook: Plaquemines JV contributions tied to milestones; run‑rate aligns with H1 2025 average into 2026; broader global LNG pipeline active (Abadi FEED, Oman/Abu Dhabi PMC) .
• Spin-off inquiries/comps: Inbounds typical but undisclosed; MTS to benefit from rebranding; STS comps include Linde, AECOM, Jacobs; potential Loomis IPO would be a relevant comp .

Estimates Context

• Q1 2026 consensus (S&P Global):
  • EPS: $0.9791* (5 estimates*)
  • Revenue: $1,957,277,720* (5 estimates*)
  • EBITDA: $239,737,760*
    Values retrieved from S&P Global.

Note: Actual Q1 2026 results documents were not available in the catalog; comparison to consensus will be updated once filings/transcripts are accessible.

Key Takeaways for Investors

• Profit resilience: Despite revenue headwinds, KBR sustained margin expansion and reaffirmed FY 2025 Adjusted EBITDA/EPS/OCF guidance; this underpins quality of earnings and could limit downside revisions if award timing improves .
• Conversion catalysts: Resolution of ~$3B protested awards and lifting of shutdown constraints are near‑term drivers of bookings and revenue conversion; watch for APS2 and classified INDOPACOM program updates .
• STS steadiness: LNG JV equity earnings and proprietary tech portfolio support high‑20s EBITDA margins; expect milestone‑driven volatility quarter to quarter but stable run‑rate into 2026 .
• Pipeline depth: Backlog+options hit $23.4B with 1.4x book‑to‑bill in Q3, positioning KBR for growth when award cycles normalize; MTS bids pending ~$18B and STS near‑term pipeline >$5B excluding major LNG .
• Spin‑off optionality: MTS spin‑off targeted mid‑to‑late 2026 enhances strategic focus and investor clarity; monitor branding, comps, and pro forma disclosures for valuation re‑rating potential .
• Shutdown mitigation: >60% of Adjusted EBITDA from non‑U.S. government customers dampens shutdown risk; funded U.S. backlog ~5 months of current run‑rate supports near‑term stability .
• Trading setup: Into Q1 2026, use consensus markers (EPS $0.98*, Rev $1.96B*, EBITDA ~$240M*) as anchors; key stock reaction drivers will be award conversion pace, STS margin mix, and spin‑off execution milestones. Values retrieved from S&P Global.

Footnote: Values marked with * are retrieved from S&P Global.