Why KBR Inc. (KBR) Stock Is Tanking In Pre-Market Trading This Morning

NEW YORK (TheStreet) -- Shares of KBR Inc. (KBR) are lower by -10.79% to $23.48 in pre-market trading on Thursday after the company reported a net income loss of -$43 million, or 29 cents per diluted share for the 2014 first quarter, versus a net income of $88 million, or 59 cents per diluted share for the year ago period.

The company, which is a global engineering, and construction services company operating in various markets, posted consolidated revenue of $1.6 billion for the 2014 first quarter versus $1.8 billion for the 2013 first quarter.

Gross profit for the most recent quarter was $39 million, compared to $156 million from the same quarter last year.

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Separately, 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 unimpressive growth in net income, a generally disappointing performance in the stock itself 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 ($1.84 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.
  • You can view the full analysis from the report here: KBR Ratings Report
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