On Sep 30, Zacks Investment Research downgraded KBR, Inc. (KBR) by a notch to a Zacks Rank #5 (Strong Sell) largely due to persistent weakness.
Why the Downgrade?
KBR has been witnessing declining estimates over the past few quarters. Also, the company missed earnings in all the four trailing quarters. Further, it witnessed strong downward estimate revisions after a lackluster second-quarter 2014 earnings release on Jul 31.
The company’s business has been largely affected by the persistent slump in its pipe fabrication and module assembly business in Canada. Three of the company’s segments reported revenue decline which was partially offset by strength in the Hydrocarbon segment. Notably, the division was the only segment to record 55% revenue growth.
Further, estimates continue to slide and earnings expectations for the rest of the year are significantly below the year-ago levels. For the current and the next quarter, earnings are expected to be 37% and 39% lower, respectively.
The only respite for KBR at the moment is its Hydrocarbon segment which has received a considerable number of contracts in the last month. However, it is yet to be seen whether the strength in this segment can offset the other negative factors presently plaguing the company.
Other Stock to Consider
Not all the companies in the engineering and diversified sector are performing as poorly as KBR. Better-ranked companies such as Willdan Group Inc. (WLDN), VSE Corp. (VSEC) and ITT Corp. (ITT) are performing well. While Willdan sports a Zacks Rank #1 (Strong Buy), VSEC and ITT hold a Zacks Rank #2 (Buy).
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