KBR (NYSE:KBR) used a recent analyst meeting to outline the benefits the company would receive from the build out of the infrastructure needed to support increased energy development over the next decade. (For related reading, check out Do-It-Yourself Analyst Predictions.)

IN PICTURES: Eight Ways To Survive A Market Downturn

The Company
KBR provides engineering, construction and other services to large companies and governments all over the world. The company had revenues of $12.1 billion in 2009, and a contract backlog of $13.3 billion as of the end of the first quarter of 2010.

Hydrocarbons Business Group
KBR's Hydrocarbons Business Group consists of construction and engineering services for upstream and downstream oil and gas projects.

The company sees a particularly large opportunity in the increase in Liquefied Natural Gas (LNG) facilities as many countries seek to monetize natural gas assets. KBR estimates that the value of LNG projects over the next five years will be $ 165 billion.

KBR won a contract in September 2009 to work on the Gorgon LNG project located in Australia. Gorgon is a large project being built by Chevron (NYSE:CVX), along with partners Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (RDS.A, RDS.B). The downstream portion of the project involves the construction of three LNG trains with annual capacity of 15 million tons.

Other opportunities in the Hydrocarbons Business Group include Gas To Liquids (GTL) facilities, offshore oil and gas development, refineries and petrochemicals. Business here is obviously driven by the price of oil and natural gas and this business should have a decent growth rate as long as commodity prices stay high. (Learn more about the industry in the Oil And Gas Industry Primer.)

Infrastructure, Government, and Power Business Group
Another important segment for KBR is the Infrastructure, Government, and Power Business Group, which provide engineering, construction and other services mostly for the U.S. government and other sovereign nations. This business is levered to government spending, in particular that of the U.S. and United Kingdom.

The company provides services to the U.S. military in Iraq under the Logistics Civil Augmentation Program (LOGCAP), but is seeing this business reduced as U.S. forces withdraw from the country. KBR also gets business from the building of infrastructure and power generation projects.

Recent Contracts
KBR has reported some recent contract wins on various projects. The company announced two contracts with DuPont (NYSE:DD) to provide construction management services on projects that the company is building. One project is for a production facility in Ohio, and the other is for the expansion of DuPont's office complex in Delaware.

Petrobras (NYSE:PBR) chose KBR for engineering and construction services at a new ammonia plant that the company is building in Brazil.

Bottom Line
KBR will be a beneficiary of the increased demand for energy and the accompanying infrastructure needed to support that development. The company is also a critical contractor to the U.S. and other governments. (For more stock analysis, take a look at 3 Utilities With A Decade's Double-Digit EPS Growth)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  2. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  3. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  4. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  5. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  7. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  8. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  9. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  10. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  4. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Trading Center