KBR's Margins May Rebound In 2011

Analysts at Pritchard Capital Partners reiterate their "buy" rating on KBR Inc KBR. The target price for KBR is set to $28. KBR reported its Q2 EPS ahead of the estimates and the consensus. Pritchard Capital Partners says, “Without the Yemen LNG change order (and an offsetting subcontractor claim), segment operating margins of 12.5% would have declined 130 BPS sequentially to 6.6% in Q2 from 7.9% in Q1. Margins should rebound in 2011 as Skikda and Esgravos work through backlog and Gorgon ramps up. We anticipate gas monetization awards will start flowing into the backlog in H2 2010 or H1 2011.” “Technology orders in Q2 of $98 million exceeded our estimate of $30 million as the segment is on pace to double revenues in 2010 year over year. This quarter’s bookings should provide $0.15 to $0.20 of accretion to EPS with operating margins in the 50% range. We feel this segment's earnings power is overlooked by the street and will be a solid provider of growth moving forward… Management raised its 2010 LOGCAP revenue guidance to 60% of 2009 revenues from 50%,” the analysts add. More Analyst Ratings here.