Assessing KBR (NYSE:KBR) Valuation After New High Tech US Government Contract Wins

KBR (KBR) is back in focus after securing two sizable U.S. government awards, including a seat on the Missile Defense Agency’s SHIELD contract with a US$151b ceiling and a US$350m technical services deal with USGS.

See our latest analysis for KBR.

These contract wins come after a mixed stretch for the stock, with a 7 day share price return of 5.1% but a 1 year total shareholder return decline of 25.5%, suggesting recent momentum is picking up after a tougher year.

If KBR’s government work has your attention, it could be a good moment to scan other aerospace and defense names too through aerospace and defense stocks for fresh ideas.

With KBR trading at US$42.25 and its own intrinsic value estimate and external price targets sitting higher, the key question is whether investors are looking at a temporary discount or a stock that already reflects its future government contract pipeline.

Most Popular Narrative: 22.9% Undervalued

At a last close of US$42.25 versus a narrative fair value of about US$54.78, the market price sits well below the valuation implied by the most followed story on KBR.

The analysts have a consensus price target of $60.714 for KBR based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $67.0, and the most bearish reporting a price target of just $53.0.

Read the complete narrative.

Curious what justifies a fair value well above today’s price? Revenue, margins and earnings are all pulled into a tight set of forward assumptions. The twist is how growth, profitability and the future P/E all interact in that model. Want to see exactly how those moving parts stack up in the full valuation story?

Result: Fair Value of $54.78 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the story can change quickly if government contract delays persist or if portfolio shifts, such as the HomeSafe exit, create more earnings volatility than analysts currently model.

Find out about the key risks to this KBR narrative.

Build Your Own KBR Narrative

If you look at the numbers and come to a different conclusion, or simply want to test your own view, you can build a custom narrative in just a few minutes with Do it your way.

A great starting point for your KBR research is our analysis highlighting 6 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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