Government and sustainable technology solutions company KBR (NYSE: KBR) missed Wall Street’s revenue expectations in Q3 CY2025, with sales flat year on year at $1.93 billion. The company’s full-year revenue guidance of $7.8 billion at the midpoint came in 2.8% below analysts’ estimates. Its non-GAAP profit of $1.02 per share was 6.9% above analysts’ consensus estimates.

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StockStory’s Take

KBR’s third quarter results drew a negative market response, as the company missed Wall Street’s revenue expectations while maintaining flat sales year over year. Management cited a slower-than-expected conversion of contract awards into revenue, particularly due to ongoing government contract protests and delays from a U.S. government shutdown environment. CEO Stuart Bradie acknowledged these external challenges, explaining that “more than $3 billion in awards remain under protest,” and that the company’s book-to-bill ratio was back-end weighted with limited impact on Q3 revenue.

Looking ahead, KBR’s adjusted profit guidance remains unchanged, but management lowered full-year revenue expectations, citing continued delays in government contract awards and project timing in its Sustainable Technology Solutions segment. Bradie noted that a robust pipeline in areas such as LNG, ammonia, and international defense offers growth potential, but cautioned that “award conversion will be even further delayed if the shutdown persists.” CFO Mark Sopp added that guidance assumes the government shutdown resolves in November and that further protest resolutions could provide upside in future quarters.

Key Insights from Management’s Remarks

KBR’s management attributed the quarter’s mixed results to delayed project awards in both segments, higher contract protests, and resilience from international and recurring revenue streams.

• Delayed contract conversions: Awarded contracts in the Mission Technologies segment faced conversion lags due to government protests and the U.S. shutdown, limiting revenue growth despite strong booking activity.
• STS segment resilience: The Sustainable Technology Solutions business offset headwinds from delayed energy transition projects by expanding geographically, particularly in the Middle East and Asia, and focusing on energy affordability and circularity.
• Diverse revenue streams: Over 60% of adjusted EBITDA came from areas with no exposure to U.S. government budgets, providing operational stability during shutdown-related uncertainties.
• Cash flow strength: The company delivered operating cash flow conversion rates above 130%, supported by disciplined cost control and reductions in days sales outstanding (DSO) in both segments, as well as proceeds from a joint venture turnover.
• Spin-off preparations: KBR is moving forward with plans to spin off its Mission Technologies segment, with the process on track for completion by mid- to late 2026. This aims to create two focused public companies with greater strategic flexibility.

Drivers of Future Performance

KBR’s outlook hinges on resolving contract protests, converting its substantial backlog, and navigating ongoing delays in project awards, especially in government-exposed segments.

• Award conversion and protests: Management emphasized that resolving $3 billion in protested awards is critical for unlocking future growth, particularly for the Mission Technologies segment. Delays from the U.S. government shutdown and protest environment are expected to persist into next quarter, influencing both revenue timing and backlog conversion.
• International and LNG project momentum: The Sustainable Technology Solutions segment is banking on continued momentum in international markets, especially with new LNG and ammonia projects in Asia and the Middle East. Management expects these markets to offset softness from delayed or canceled energy transition projects and provide medium-term growth drivers.
• Spin-off execution and portfolio mix: The upcoming spin-off of the Mission Technologies segment is intended to sharpen strategic focus and operational independence for both resulting companies. Management highlighted anticipated benefits such as more targeted capital allocation, improved branding, and the ability to pursue tailored M&A strategies for each business post-separation.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be monitoring (1) resolution of government contract protests and the pace at which protested awards convert to revenue, (2) continued momentum and backlog growth in international LNG and energy security projects, and (3) progress on the planned spin-off, including clarity on leadership appointments and pro forma financials. Execution against these milestones will help determine if KBR can sustain growth despite near-term award delays.

KBR currently trades at $42.74, in line with $42.90 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).

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