By late morning, shares had slipped 4.4% to $24.71.
The construction company said it had determined the estimated costs to complete seven Canadian pipe fabrication contracts will result in pre-tax charges of $158 million. This would consist of the reversal of $23 million in previously recognized pre-tax profits and the recognition of around $135 million in pre-tax estimated losses at completion.
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"The negative cash impact associated with the work released to date under the seven contracts has largely been incurred and the forecast net negative cash flow to complete this work is expected to be less than $45 million," the company said in a statement.
"We believe that the majority of these losses should have been recognized in our consolidated financial statements for the year ended December 31, 2013."
Additionally, the company identified overstated revenue recognition on a long-term construction project of around $9 million.
KBR expects to amend its financial statements and release revised copies.
TheStreet Ratings team rates KBR INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate KBR INC (KBR) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- KBR's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.48, which illustrates the ability to avoid short-term cash problems.
- KBR INC's earnings per share declined by 10.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, KBR INC increased its bottom line by earning $1.54 versus $0.96 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus $1.54).
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, KBR has underperformed the S&P 500 Index, declining 12.90% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Construction & Engineering industry. The net income has decreased by 10.0% when compared to the same quarter one year ago, dropping from $30.00 million to $27.00 million.
- You can view the full analysis from the report here: KBR Ratings Report