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KBR Aids Military Space & Intelligence Business With Centauri

KBR, Inc. KBR has acquired Centauri, LLC from Arlington Capital Partners to become a leading provider of high-end, mission-critical technical services and solutions. Shares of KBR climbed 4% on Oct 5, following the news.

On Aug 19, it announced that it has entered into a deal with Arlington Capital to buy Centauri for $880 million (with $300 million cash and $500 million debt). Centauri — now part of KBR’s Government Solutions (GS) segment — is a leading independent provider of space, directed energy and other advanced technology solutions to the U.S. Intelligence Community and Department of Defense. It has been helping the U.S. government in advancing national security by serving some of the most important, challenging and complex missions.

The buyout will expand KBR's military space and intelligence business, as well as build upon its existing cybersecurity and missile defense solutions. Stuart Bradie, KBR’s president and CEO said, "Centauri adds an enormous benefit to KBR, as a result of its highly technical, differentiated portfolio, creating opportunities for substantial growth and putting KBR at the forefront of the government solutions sector."

KBR’s Inorganic Spree & Government Business Bode Well

KBR has a penchant for acquisitions and strategic alliances for bolstering inorganic growth and expanding market share. The Centauri acquisition is followed by the March buyout of certain assets and assumed liabilities of Scientific Management Associates Pty Ltd’s government defence business to enhance its position as a provider of high-end technical training to the Australian Armed Forces, as well as Navy.

In addition to business expansion strategy, the company has been reshaping its portfolio to focus on two segments - GS and Technology Solutions (TS). The company’s GS segment — accounting for approximately 70% of total revenues — has been performing pretty well on the back of robust operational performance and progress on international programs.

As of Jun 30, 2020, its total backlog came in at $12.59 billion, of which GS booked $10.52 billion and TS accounted for $561 million. The units had a book-to-bill ratio of 1 and 1.5, respectively, excluding the impact of long-term PFIs.



However, shares of KBR have underperformed the industry year to date. The company has been witnessing significant competitive pressure. Also, its dependency on major construction projects and Front End Engineering Design contracts — which take longer to complete — is a concern.

Nonetheless, its 60 years of expertise in mission-critical solutions for customers throughout the missile defense, space and intelligence domains — including the U.S. Army, Navy, Air Force, Department of Defense and NASA — will enable it to overcome these woes.

Zacks Rank

KBR — which shares space with Fluor Corporation FLR, Jacobs Engineering Group Inc. J and AECOM ACM in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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