Ironically, I am less impressed with KBR's (KBR) earnings than I am with Foster Wheeler's(FWLT), but the former is up and the latter is down. KBR actually missed on apples to apples continuing operations (28 cents vs 32 cents analysts)- but expectations were so low, I suppose the stock could rally. Typical. But I think the wrong company is taking the big hit today. People only seem to look at headlines these days on Wall Street, not look at the numbers so they see a big "beat"....which is not accurate.
Backlog is solid but only rose 5%. My worry with KBR is the focus in Iraq; while the company has been branching out into a lot of other areas to provide diversification its bread and butter is still Iraq. If... errr... when Obama gets elected, this could pressure the stock. But the trends are a bit troubling to me; profits are up, but full year revenue has been quite flat this year. On the positive side, due to Cheney connections I could see this company getting a lot of high level business opportunities, especially in the Middle East (i.e. Saudi Arabia)
Technically this is actually a chart that is improving as the stock broke back above its 50 day moving average in the past few days. But with the stock up from $30s to near $36 in just over a week, I am going to break one of my rules and sell a vastly improved chart. While the stock could continue to run, I don't see myself allocating much money to the name go forward so having a small stake in a name I have questions about probably doesn't make sense. So while I could see a run to $40, I just don't have enough skin in this game to make it worthwhile.
Again, if you take away the stock action all the numbers in the Foster Wheeler report were much more impressive to me (plus FWLT trades at a lower valuation)... but it's all about results vs expectations and KBR clearly had a lower bar to hurdle. So I am a bit mixed on how to treat this stock... but we'll sell for now and see how the next 3-4 quarters play out.
I am selling my 0.7% stake in KBR, 225 shares, in the low $36s. I've held KBR since August 10, 2007 as part of my large basket of infrastructure stocks - buying as low as the upper $20s and as high as low $40s; all in all I lost about $1500 on this position over the 6+ months, as the stock gave back all of its gains by mid January.
- Former Halliburton subsidiary KBR Inc. said Tuesday fourth-quarter profit rose 65 percent, lifted by contributions from natural-gas projects, work in Iraq and a tax benefit related to a 2006 asset sale.
- The Houston-based military contractor and engineering and construction firm said profit for the October-December period was $71 million, or 42 cents a share, up from $43 million, or 28 cents a share, in the prior-year period. The most-recent quarter included income from discontinued operations of $23 million, or 14 cents a share, due to tax benefits from the 2006 sale of its production services group. Wall Street expected KBR to earn 32 cents in the quarter, excluding one-time items.
- Revenue for the final three months of 2007 amounted to $2.4 billion, topping the Wall Street forecast of $2.27 billion. Revenue in the year-ago quarter was $2.3 billion.
- The company, which split from Halliburton last spring, said income from continuing operations amounted to $48 million, or 28 cents a share, versus comparable income of $45 million, or 30 cents a share, a year ago.
- KBR said operating income in the fourth quarter of 2007 was partially offset by $22 million in charges from potentially disallowable costs incurred under U.S. government contracts in the Middle East in 2003.
- KBR is probably best known for providing food and shelter to U.S. troops in Iraq, thought Utt has said the company is likely to continue to do less work in Iraq as troop levels decrease.
- KBR has announced several new contracts in the past year, both in the U.S. and overseas. They include a pact to manage construction of a chemicals and plastics production complex in Ras Tanura, Saudi Arabia -- a plant that's expected to be among the world's largest petrochemical facilities.
Long Foster Wheeler in fund and personal account
