KBR, INC. (KBR)·Q3 2026 Earnings Summary

Executive Summary

• KBR delivered solid Q3 performance with revenues of $1.93B, Adjusted EBITDA of $240M (12.4% margin), and Adjusted EPS of $1.02; strength came from equity in earnings on LNG and disciplined cost control .
• Results vs consensus: EPS beat by ~$0.07 while revenue missed by ~$0.04B; forward Q3 2026 consensus implies continued EPS and revenue growth, supporting margin durability even amid award delays *.
• Guidance: FY25 revenue guidance was lowered to $7.75–$7.85B while Adjusted EBITDA ($960–$980M) and Adjusted EPS ($3.78–$3.88) were maintained, underscoring cost discipline and project execution resilience .
• Stock reaction catalysts: mixed top/bottom-line outcome and lowered revenue guide drove negative pre-market moves, while spin-off progress and backlog expansion underpin medium-term thesis .

What Went Well and What Went Wrong

• What Went Well

  • Margin expansion and bottom-line strength: Adjusted EBITDA up 10% YoY to $240M and Adjusted EPS up 21% to $1.02; management emphasized “delivery excellence, strong commercial management, and prudent cost control” .
  • Strong cash generation and conversion: Operating cash flow of $198M in Q3; operating cash conversion of 152% on DSO improvements in both segments .
  • Strategic pipeline and bookings: Book-to-bill of 1.4x and backlog plus options at $23.4B; notable awards include NASA HHPC (ceiling value $2.5B) and Space Force DICE, reinforcing MTS positioning in mission-critical domains .

• What Went Wrong

  • Top-line headwinds: Revenue flat YoY ($1.931B vs $1.937B) due to slower award pace and EUCOM reductions in Readiness & Sustainment; NASA funding delays also weighed on Science & Space .
  • Award/protest conversion delays: ~$3B in awards under protest and shutdown impacts slowed booking-to-revenue conversion, pressuring near-term growth visibility .
  • STS revenue softness and mix: STS revenue down 1% QoQ, with lower-margin proprietary equipment mix temporarily depressing segment margins despite strong equity earnings from Plaquemines LNG .

Financial Results

Notes: Asterisks indicate values retrieved from S&P Global.*

Guidance Changes

Drivers: Award delays, shutdown-related protest resolution deferments; margin and cash conversion intact on disciplined execution and equity income contributions .

Earnings Call Themes & Trends

Management Commentary

• “Despite revenue headwinds, KBR achieved year on year double digit Adjusted EBITDA growth, strong cash conversion and maintained operational momentum with a strong book to bill.” — Stuart Bradie, CEO .
• “Adjusted EBITDA margins were 23.5%… continued strong contribution from the Plaquemines LNG project… we advanced more milestones… and that bumped up our profit recognition this quarter.” — Mark Sopp, CFO .
• “We now have $3 billion in awards which we have won but cannot book or start until the protest clears.” — Mark Sopp .
• “Spin-off preparations are advancing according to plan… audits of historical carved-out financial statements… groundwork for the Form 10.” — Stuart Bradie .

Q&A Highlights

• STS growth visibility into 2026: Management remains aligned with double-digit STS revenue CAGR targets, noting Q3/Q4 book-to-bill momentum despite 2025 revenue headwinds .
• NASA/Science exposure: Limited near-term impact under shutdown; science lower margin; HHPC win and human space performance programs expected to be funded, though budgets remain uncertain .
• LNG pipeline: Plaquemines equity earnings to run through 2026 and into 2027; Abadi FEED launched; multiple global LNG opportunities beyond Plaquemines and Lake Charles .
• Protest resolution cadence: APS2 adds ~$160M to backlog once NTP issued post-shutdown; ~$3B under protest represents significant upside when resolved .
• Spin-off interest/comps: Management focused on branding and investor day strategy; MTS peers in government services; STS has limited direct comps, with Linde/AECOM/Jacobs cited for elements .

Estimates Context

• Q3 2025 vs consensus: EPS $1.02 vs $0.95* (beat); Revenue $1.931B vs $1.973B* (miss) *.
• Forward (Q3 2026): EPS consensus ~$1.01*; Revenue consensus ~$2.031B*; EBITDA consensus ~$247.6M* indicates expectations for continued margin delivery and modest top-line growth despite award conversion timing risks*.
• Implications: Sell-side likely to maintain profit trajectory while moderating near-term revenue growth assumptions until shutdown/protest resolutions normalize; FY25 revenue guide reset supports realistic baseline, with backlog providing medium-term visibility *.

Notes: Asterisks indicate values retrieved from S&P Global.

Key Takeaways for Investors

• Near-term: Expect continued EPS/margin strength driven by LNG equity earnings and cost discipline; focus on shutdown resolution and protest conversions as catalysts for top-line acceleration .
• Backlog-driven visibility: Record backlog plus options ($23.35B) and 1.4x book-to-bill support medium-term growth as awards convert post-shutdown .
• Segment mix: STS margins can fluctuate with proprietary equipment mix; LNG milestones and Brown & Root JV contributions underpin durability .
• Guidance: Revenue lowered but profit and cash flow guidance maintained—watch delivery against OCF $500–$550M and Adjusted EBITDA $960–$980M to validate execution amid macro/policy noise .
• Spin-off: MTS separation progressing toward mid-to-late 2026; potential value unlock via focused pure-plays and capital allocation flexibility .
• International exposure: Australia/UK/Europe defense and Middle East energy security projects diversify away from U.S. government funding risk, supporting resilience .
• Trading lens: Near-term volatility tied to award conversion headlines; watch for protest resolutions and NASA budget clarity; medium-term thesis anchored on backlog conversion, spin-off execution, and LNG cadence .

Important coverage note: Primary source documents for Q3 2026 were not available as of this writing; analysis is anchored in Q3 2025 results and call content with forward consensus and trend context .