What a difference two months make! On April 8, the Nasdaq had plummeted to bear market territory and the S&P 500 was on the cusp of joining it. Fast forward to today and it’s a totally different picture. I like KBR Inc. (KBR) here, writes Chris Preston, chief analyst at Cabot Value Investor.
Small caps were faring even worse during the selloff. Volatility had spiked to multi-year highs. And everyone was certain a recession or high inflation – or both – were imminent.
Now, tariffs are on a 90-day pause. Volatility has evaporated. Inflation is at four-year lows. The economy is doing just fine, with unemployment holding steady. And in Q1, US companies just posted a second consecutive quarter of double-digit earnings growth.
KBR Inc. (KBR)
Granted, the coast isn’t totally clear – not by a long shot. But as investors, we have to go with the evidence in front of us, and right now, it’s quite good.
As for KBR, it’s an industrial conglomerate that has its hand in a lot of big, revenue-generating pies – aerospace, defense, energy, engineering, and intelligence. Its Government Solutions segment provides support for agencies including NASA, militaries in the US, UK, and Australia, and infrastructure projects from Indonesia to the Middle East.
Its Sustainable Technology Solutions segment helps engineer energy projects, helps companies and governments transition to more sustainable forms of energy, and provides energy security solutions in markets like the Middle East. KBR also dabbles in cybersecurity, national security solutions, surveillance, global supply chain management, data analytics, and much more.
As with most industrials, business slowed to a crawl in the aftermath of Covid-19 due in large part to supply-chain issues. Last year, however, brought a new record high of $7.74 billion. This year, analysts see revenues at $8.76 billion, a 13% improvement. Then they expect it to hit $9.5 billion next year.
After failing to turn a profit in 2023, the company is on track for a record $3.85 in EPS this year (up 15% from 2024) and $4.27 next year.
Recommended Action: Buy KBR.
