KBR (NYSE:KBR) Misses Q1 Revenue Estimates

Government and sustainable technology solutions company KBR (NYSE: KBR) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 13% year on year to $2.06 billion. On the other hand, the company’s full-year revenue guidance of $8.9 billion at the midpoint came in 0.8% above analysts’ estimates. Its non-GAAP profit of $0.98 per share was 13.7% above analysts’ consensus estimates.

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“KBR delivered strong performance in the first quarter, driving higher year-over-year revenues, margin, earnings, and cash flow,” said Stuart Bradie, President and CEO.

Company Overview

Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.

Sales Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, KBR’s sales grew at a mediocre 6.5% compounded annual growth rate over the last five years. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about KBR.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. KBR’s annualized revenue growth of 10.3% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. KBR’s backlog reached $17.29 billion in the latest quarter and averaged 5.2% year-on-year growth over the last two years. Because this number is lower than its revenue growth, we can see the company fulfilled orders at a faster rate than it added new orders to the backlog. This implies KBR was operating efficiently but raises questions about the health of its sales pipeline.

This quarter, KBR’s revenue grew by 13% year on year to $2.06 billion but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 12.3% over the next 12 months, an improvement versus the last two years. This projection is healthy and implies its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

KBR was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.7% was weak for an industrials business.

On the plus side, KBR’s operating margin rose by 4.9 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, KBR generated an operating profit margin of 9.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

KBR’s EPS grew at a spectacular 15.8% compounded annual growth rate over the last five years, higher than its 6.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into KBR’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, KBR’s operating margin was flat this quarter but expanded by 4.9 percentage points over the last five years. On top of that, its share count shrank by 7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For KBR, its two-year annual EPS growth of 13.4% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q1, KBR reported EPS at $0.98, up from $0.77 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects KBR’s full-year EPS of $3.56 to grow 8.3%.

Key Takeaways from KBR’s Q1 Results

We enjoyed seeing KBR beat analysts’ EBITDA expectations this quarter. We were also glad its backlog outperformed Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, we think this was still a mixed quarter. The stock remained flat at $51.20 immediately following the results.

Is KBR an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.