Last Update 05 Jan 26

Fair value Decreased 1.52%

KBR: Upcoming Business Spin Will Drive Upside As Margins Remain Resilient

Analysts have modestly reduced their price target on KBR, trimming fair value expectations by about $1 to roughly $55. They are factoring in a slightly slower growth and margin outlook, even as profitability guidance is maintained and spin-related catalysts are anticipated.

Analyst Commentary

Analyst commentary on KBR reflects a mix of optimism around valuation upside and spin-driven catalysts, balanced against concerns over a slower growth backdrop and near-term execution risks.

Bullish Takeaways

Bullish analysts highlight upside to fair value, with some targets moving into the low $60s. This implies meaningful appreciation potential from current levels.
The planned business spin is viewed as a key catalyst that could unlock portfolio value, sharpen strategic focus, and support multiple expansion over the next year.
Despite trimmed revenue expectations into 2025, management maintaining profitability guidance is seen as evidence of solid cost discipline and resilient margin execution.
Over the longer term, exposure to mission and sustainable technologies is viewed as a structural growth driver that can offset near-term contract timing headwinds.

Bearish Takeaways

Bearish analysts point to a slower macro and sector backdrop. Engineering services screen less favorably versus construction machinery names based on growth and supply dynamics.
Guidance reductions for 2025 revenue, driven by shutdown-related delays and sluggish award activity, reinforce concerns about the pace and visibility of top-line conversion.
Execution risk around converting the Mission Technology Solutions pipeline, particularly in a constrained government funding environment, tempers near-term growth expectations.
Until growth reaccelerates and contract awards normalize, some see limited justification for further multiple expansion, keeping recommendations anchored around neutral ratings.

What's in the News

Awarded a seat on the U.S. Navy's WEXMAC 2.1 TITUS IDIQ contract, which positions KBR to compete for up to $20 billion in task orders over a potential 10 year period to support U.S. defense readiness and humanitarian operations (Key Developments).
Secured a PureMSM green methanol technology contract with Fikrat Al Tadweer for a biomethanol plant in Saudi Arabia that will convert landfill gas into clean fuels, expanding KBR's low carbon solutions footprint in the region (Key Developments).
Won technology and engineering work for IGNIS's 200,000 tons per year green ammonia facility in Spain, using renewable power to produce green hydrogen and ammonia for fertilizers and clean fuel applications (Key Developments).
Awarded an estimated $117 million follow on Foreign Military Sales support contract for F/A 18 and EA 18G programs with U.S. allies, reinforcing KBR's long term role in international defense readiness (Key Developments).
Lowered 2025 revenue guidance by roughly 9 percent at the low end, largely due to removal of HomeSafe JV revenue. Also trimmed overall 2025 revenue expectations to a range of $7.75 billion to $7.85 billion, bringing formal guidance in line with the more cautious outlook discussed by analysts (Key Developments).

Valuation Changes

Fair Value: Reduced slightly from about $55.63 to roughly $54.78 per share, reflecting a modest tempering of long term valuation assumptions.
Discount Rate: Increased marginally from approximately 8.17 percent to 8.17 percent, indicating a very small uptick in perceived risk or required return.
Revenue Growth: Eased slightly from around 5.86 percent to about 5.85 percent, signaling a minor softening in the long term growth outlook.
Net Profit Margin: Lowered modestly from roughly 7.38 percent to about 7.36 percent, suggesting slightly more conservative profitability expectations.
Future P/E: Declined slightly from about 11.10x to roughly 10.97x, implying a small contraction in the multiple applied to forward earnings.

Momentum in defense, infrastructure, and sustainable tech markets positions KBR for sustained growth, aided by rising demand for digital and environmentally compliant solutions.
Strategic shift toward high-margin, technology-driven projects and global diversification is improving profitability, supported by a robust project pipeline despite short-term award delays.
Reliance on volatile government contracts, geopolitical uncertainties, and ambitious portfolio shifts heighten earnings risk, margin pressure, and revenue unpredictability amid shifting client demands and budget disruptions.

Catalysts

About KBR

Provides scientific, technology, and engineering solutions to governments and commercial customers worldwide.What are the underlying business or industry changes driving this perspective?

The passage of the U.S. Reconciliation Act is unlocking over $1 trillion in national security and defense spending through 2026, with KBR well-positioned to capture incremental funding due to its established positions in mission tech, advanced defense technologies, and intelligence contracts-supporting potential revenue and earnings growth.
Accelerated investment in energy transition and infrastructure (especially in the Middle East, emerging markets, and digital infrastructure) is directly driving demand for KBR's proprietary technologies in ammonia, hydrogen, carbon capture, and sustainable infrastructure, setting up multiyear growth opportunities with margin expansion due to higher-value projects.
Award decisions and project starts across both government solutions and sustainable tech segments have been temporarily delayed due to macro/geopolitical uncertainty, but the pipeline has reached record levels; a normalization in award cadence is likely to lead to a step-up in revenue and backlog conversion in 2H 2025 and into 2026.
KBR's increasing focus on high-margin, technology-driven contracts, alongside a diversified customer base and geographic expansion (notably in higher-growth/higher-margin international markets) positions the company for improved net margin and earnings quality, as legacy lower-margin programs fall away.
The company's advanced digital, data, and engineering capabilities are in growing demand as defense and infrastructure clients shift towards integrated, digital-first, and ESG-compliant solutions-supporting top-line growth and sustaining above-peer margins as traditional providers lose share to more technologically advanced competitors.

KBR Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming KBR's revenue will grow by 5.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.0% today to 7.0% in 3 years time.
Analysts expect earnings to reach $664.3 million (and earnings per share of $5.36) by about September 2028, up from $400.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $442.2 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.3x on those 2028 earnings, down from 15.9x today. This future PE is lower than the current PE for the US Professional Services industry at 26.3x.
Analysts expect the number of shares outstanding to decline by 3.3% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.82%, as per the Simply Wall St company report.

KBR Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The unexpected termination of the HomeSafe Alliance joint venture, an initiative that was expected to deliver considerable long-term revenue, exposes KBR's dependence on large, complex fixed-price government contracts, raising the risk of significant revenue volatility, execution issues, and margin compression due to lost or impaired projects.
Delays and uncertainty in government contracting, including extended protest resolutions and DoD program defunding, have materially reduced short-term revenue guidance and threaten predictable conversion of a substantial contract pipeline, which may continue if political or budgetary fragmentation in the U.S. persists, impacting both top-line growth and earnings visibility.
Geopolitical volatility, especially in core growth regions like the Middle East and Europe, introduces significant uncertainty to project cadence and capital spending; regional instability or changes in government priorities could delay or derail planned infrastructure and energy transition projects, directly impacting future revenues.
The company's guidance and long-term targets now begin from a lower base due to recent revenue headwinds, and assumptions depend heavily on the smooth allocation of incremental defense and infrastructure budgets; disruptions or delays to these funding flows (including NASA funding uncertainty and international defense spending execution) could mute projected CAGRs and net margin expansion.
KBR's ongoing portfolio shift into higher-margin, technology-driven sustainable solutions and international government markets comes with investment requirements and potential operational risks, especially as competition intensifies and client demands accelerate for digitalization and ESG compliance, creating pressure on cost structures and requiring successful talent retention, or else risking margin erosion and muted earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $60.714 for KBR based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $67.0, and the most bearish reporting a price target of just $53.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.4 billion, earnings will come to $664.3 million, and it would be trading on a PE ratio of 13.3x, assuming you use a discount rate of 7.8%.
Given the current share price of $49.31, the analyst price target of $60.71 is 18.8% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

Have other thoughts on KBR?

Create your own narrative on this stock, and estimate its Fair Value using our Valuator tool.

Create Narrative

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

KBR: Segment Separation Will Unlock Value Amid Project Delays In 2025