KBR Q2 2024: Raises EBITDA Guide to $825–850M, EPS to $3.15–3.30
- Strong STS Segment Momentum: KBR’s STS bookings remain robust with a trailing 12‐month multiple at 1.2x and approximately $500 million of orders in Q2, underscoring a solid pipeline—especially in the Middle East—that supports future revenue growth.
- Diversified Market Exposure: The company is well positioned in both traditional energy security projects (e.g., LNG, liquid chemicals) and energy transition initiatives. This diversified approach helps offset slower growth in one area by leveraging robust demand in the other.
- High-Value Government Contracts: Participation in large government contracts, exemplified by the $43 billion MQS2 contract and strong equity earnings from key programs like Aspire and joint ventures, indicates potential for significant upside and long-term revenue stability.
- Potential U.S. political and economic volatility: Management noted the likelihood of increased volatility in the U.S. due to elections and related market uncertainties, which could impact project execution and demand.
- Uncertainty around key project contracts: There is ambiguity regarding key projects such as the Plaquemines contract—details have not been disclosed until approval by customers—raising concerns about revenue recognition and the sustainability of the order backlog. ** **
- Reliance on strong first-half performance amid uncertain headwinds: The upward revision in guidance was primarily driven by robust early performance, but there remains a risk that underlying uncertainties and market headwinds (both domestic and international) could negatively affect future results.
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Guidance Increase
Q: Why is guidance raised?
A: Management raised full‑year adjusted EBITDA and EPS guidance thanks to strong first‑half performance, with robust operations bolstering confidence despite market volatility ($825–850M EBITDA, $3.15–3.30 EPS). -
LinQuest Accretion
Q: Will LinQuest be accretive?
A: They expect the LinQuest acquisition to be immediately accretive on a cash basis and drive low double‑digit EBITDA growth for 2025, reinforcing their strategy. -
Pipeline Strength
Q: Is STS pipeline robust?
A: Excluding the LNG project, STS achieved a 1.1x bookings-to-revenue ratio in Q2 and 1.2x over the trailing 12‑months, reflecting a strong pipeline supporting growth. -
Realignment Plans
Q: What does realignment achieve?
A: The planned reduction from three to two business units is intended to simplify operations, reduce complexity, and better consolidate projects into a more efficient structure. -
Plaquemines Headwind
Q: When does Plaquemines headwind normalize?
A: Management expects the headwind from the Plaquemines project to subside by mid‑2025, as its peak impact diminishes and earnings stabilize. -
STS Order Value
Q: What is STS order value?
A: The Q2 STS orders were approximately $500 million, underscoring a solid backlog when excluding the non‑revenue Plaquemines burn. -
Plastics Monetization
Q: Update on plastics projects?
A: There are three projects under construction: one in the U.K. expected to produce in Q3, one in Korea reaching mechanical completion in Q3, and a Japan project scheduled for Q1 2025. -
Acquisition Competition
Q: Was the LinQuest deal competitive?
A: Management confirmed that the LinQuest acquisition involved a competitive process, chosen for its strategic fit and its potential to accelerate mission IT capabilities.
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