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KBR (KBR) Inks First VAM Technology Contract From Shenghong

Zacks Equity Research

KBR, Inc. KBR received a contract from Shenghong Refining Petrochemical (Lian Yun Gang) Co. Ltd., China to provide Vinyl Acetate Monomer (VAM) technology. The pact between KBR and Showa Denko K.K. (SDK) has secured the first commercial VAM technology license.

Per the contract, KBR will provide technology licensing as well as basic engineering design and proprietary equipment services for the 300 KTA VAM unit that will be constructed in Lianyungang, China.

The KBR-SDK collaboration has more than 40 years of experience in SDK's ethylene based VAM unit at the Oita Petrochemical Complex in Japan. The parties are optimistic about the success of this contract. Doug Kelly, President, KBR Technology Solutions, stated, “This award consolidates KBR's position as a licensor of specialty chemicals technologies and strengthens our relationship with a key partner in Shenghong.”

Technology Solutions Bodes Well

We believe that the company’s Technology Solutions segment will continue to benefit from contracts win, which will drive the company’s top line. Last week, the company announced its integration with Chevron Lummus Global’s (“CLG”) LC-MAX technology to support Hindustan Petroleum Corporation Limited’s (“HPCL”) modernization project at the Visakh refinery in India. Also, during the third quarter 2019, the company received a Purifier license and basic engineering design contract for the largest grassroots ammonia plant designed by KBR that primarily featured energy efficiency, flexibility and lower capital costs. Notably, the segment’s revenues increased 18.5% year over year in the third quarter of 2019.

The Technology Solutions segment recorded 48%, 29% and 19% organic growth in the first, the second and the third quarter of 2019, respectively. The results were primarily backed by strong execution across its chemical, petrochemical, refining and ammonia projects as well as higher proprietary equipment sales. The company expects global technology opportunities led by ammonia, refining and olefins projects to continue.

Courtesy of robust contribution from the company’s businesses, shares of KBR have surged 96.7% so far this year compared with the industry’s 24.8% rally.

Zacks Rank & Key Picks
 
Currently, KBR currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the  same space are Gates Industrial Corporation plc GTES, Quanta Services, Inc PWR, and AECOM ACM. Gates and Quanta Services sport a Zack Rank #1, while AECOM carries a Zacks Rank #2 (Buy).

Gates Industrial’s earnings surpassed estimates in two of the trailing four quarters, the average being 12.1%.

Quanta Services’ current-year earnings are expected to rise approximately 15%.

AECOM has three-five year expected earnings per share growth rate of 9.3%.

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