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KBR (KBR) Is Water-Logged And Getting Wetter Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified KBR ( KBR) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified KBR as such a stock due to the following factors:

  • KBR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $38.8 million.
  • KBR has traded 3.0 million shares today.
  • KBR traded in a range 297.6% of the normal price range with a price range of $1.59.
  • KBR traded below its daily resistance level (quality: 26 days, meaning that the stock is crossing a resistance level set by the last 26 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on KBR:

KBR, Inc. operates as an engineering, construction, and services company worldwide. The company's Gas Monetization segment designs and constructs liquefied natural gas and gas-to-liquids facilities. The stock currently has a dividend yield of 1.2%. KBR has a PE ratio of 52.4. Currently there are 7 analysts that rate KBR a buy, no analysts rate it a sell, and 6 rate it a hold.

The average volume for KBR has been 2.3 million shares per day over the past 30 days. KBR has a market cap of $3.9 billion and is part of the services sector and diversified services industry. The stock has a beta of 1.88 and a short float of 1.3% with 0.93 days to cover. Shares are down 17.5% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates KBR as a hold. 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 unimpressive growth in net income, a generally disappointing performance in the stock itself and poor profit margins.

Highlights from the ratings report include:

  • 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 ($1.84 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 21.97% from its price level of one year ago. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 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.

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