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First real DD post in here, giving jam to the pigs as we say in my country. English is not my first language so I used Claude to make it readable. Position for crayon eaters, TLDR for the reading-capable, and the rest for those with a high-end attention span relative to the regular degen in here. All references are at the end.
**TLDR**
$KBR at $40. Analyst consensus $54-67. Strong Buy. Zero sell ratings.
The $900M HomeSafe hit is already in every model. The stock is cheap because it looks bad on a revenue chart.
Q4: EPS beat, margins +190bps, record $23.2B backlog, 76% of 2026 revenue locked in, $557M OCF.
$3.5B+ in new contracts in the first 9 weeks of 2026.
EPS growing 13-24% per year through 2028. P/E drops to 7x at current price. Sector average 40x+. Spinoff of MTS in mid-to-late 2026. Activist-backed. Form 10 filed. Conglomerate discount goes away.
Maintained major US government contracts across 6 presidents, both parties, through criminal fines, fraud settlements and contract failures.
Risks: execution history is real, SpinCo CEO search ongoing, Lake Charles LNG pause, class action manageable. -20% return YTD, underperformed the market by 40% YTD.
1800 shares @ $40 avg. Putting my money where my mouth is. For bottom chasers it might dip to $35-37 with this shitty macro but the boat is sailing soon on this one. Bogglehead can wait for next ER 05/05 to confirm the business is fine and the backlog is already maxed out.
Not financial advice.
https://preview.redd.it/zv2a47iz9wng1.png?width=1220&format=png&auto=webp&s=6f0847d96e32382b35577e64275590e398031967
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**What is KBR**
KBR (formerly Kellogg Brown & Root) is an engineering and government services company. Two segments.
Mission Technology Solutions (MTS): Defense, space, intelligence, government IT. AI systems for the
Air Force, logistics for the Army, spacecraft engineering for NASA. About 75% of revenue.
Sustainable Technology Solutions (STS): LNG technology, ammonia plants, clean refining. They helped engineer roughly a third of global LNG production capacity. About 25% of revenue.
$7.8B in annual revenue, 37,000 employees, 30+ countries.
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**Why it's cheap**
In 2022 KBR won a contract called HomeSafe to manage military family relocations across the US. They couldn't execute it. In June 2025 the Pentagon cancelled it. Stock fell from $72 to the low $40s and has sat there since.
The contract had basically no profit margin. KBR said so in the termination announcement: the cancellation was "not expected to have a material effect" on 2025 adjusted EBITDA. They cut revenue guidance by $900M and left EBITDA and EPS guidance untouched. The $900M was mostly empty revenue.
That $900M is already in every analyst's model. The consensus fair value of $54-67 already assumes HomeSafe is permanently gone. The stock is cheap because it looks bad on a revenue chart, not because there's live unpriced risk under it.
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**Q4 2025 earnings**
| Metric | Actual | Consensus |
| Adjusted EPS | $0.99 | $0.95 — beat |
| Revenue | $1.85B | \~$1.9B — miss (HomeSafe/EUCOM) |
| EBITDA Margin | 12.6% | \~12.0% — +190bps |
| Full-Year Adj. EPS | $3.93 | $3.81 — beat |
| MTS Backlog | $23.2B | record, +13% YoY |
| 2026 revenue under contract | 76% (82% MTS) | already locked in |
Revenue has missed four quarters in a row. Every miss is HomeSafe and EUCOM scope reductions. The underlying business is in decent shape: margins expanding, backlog at a record, 76% of 2026 revenue already under contract today.
Operating cash flow was $557M in FY2025, 110% conversion to net income. EPS and OCF both beat the top of guided ranges. They returned $329M in buybacks and $84M in dividends while paying down debt. CEO Stuart Bradie on the Q4 call: "both segments exit 2025 with improving momentum and visibility."
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**Valuation**
EPS trajectory:
| Year | Adj. EPS | Growth | P/E at $40 |
| 2025A | $3.93 | +18% | 10.2x |
| 2026F | \~$4.00 | \~+2% | \~10x |
| 2027F | \~$4.50 | \~+13% | \~9x |
| 2028F | \~$5.60 | \~+24% | \~7x |
Sector average P/E is north of 40x. KBR's own 5-year historical average is around 17x. Every metric is well below its own history:
| Metric | Current | 5yr Avg |
| Forward P/E | 10.2x | \~17x |
| EV/EBITDA | 7.7x | \~11x |
| Price/OCF | \~8x | \~16x |
DCF models across multiple sources give fair value of $54-67. TipRanks average $54, StockAnalysis $56, TradingView $67, TickerNerd median $64, Benzinga $59. All with HomeSafe already gone from the model.
FCF was negative in 2024 due to HomeSafe working capital. Recovered to $557M operating cash flow in 2025. Net debt/EBITDA was 3x in 2023, below 2.5x exiting 2025, falling.
Peers for context:
| Company | Fwd P/E | Consensus |
| KBR | \~10x | Strong Buy |
| AECOM | \~19x | Mixed |
| Jacobs Solutions | \~34x | Mixed |
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**Contract wins since January 2026**
Feb 3: $149M Air Force digital transformation at Eglin AFB, 7-year IDIQ. Feb 9: $103M Space Force contracts, AI analytics and workforce design.
Feb 18: $3.1B LOGCAP V extension. GAO backed the Army's sole-source extension covering European and Northern Command for five more option years. A competitor filed a protest. GAO rejected it.
Feb 24: DoD digital engineering expansion, digital twins and virtual prototyping for F/A-18, Blackhawk, Chinook and missile defense systems.
Jan 12: FEED contract for Coastal Bend LNG export facility, Texas Gulf Coast. Jan 7: Position on MDA's SHIELD contract, $151B ceiling, missile defense.
Mar 4: 10-year catalyst supply contract for Indorama's ammonia portfolio, 6 plants across 4 countries.
Also positions on a $20B Navy readiness contract and the Majnoon oil field in Iraq, 38 billion barrels of estimated reserves.
Over $3.5B in new awards in the first 9 weeks of 2026.
**Iran and the Hormuz factor**
The US-Israel strikes on Iran that started February 28 matter directly for KBR. About 20% of global oil supply transits the Strait of Hormuz daily. Insurance withdrawal is effectively closing it commercially. That does two things for KBR specifically.
First, US LNG export infrastructure just became a national security priority overnight. KBR already has the FEED contract for Coastal Bend LNG on the Texas Gulf Coast. When politicians need to show they're replacing Gulf supply, that pipeline of projects accelerates. KBR licenses roughly a third of global LNG production.
Second, active conflict means active logistics. KBR has held the Army's main logistics contract almost continuously since 1985. LOGCAP V just got extended through a GAO protest in February. If US forces are operating anywhere near the Gulf theater, KBR is the company moving their supplies and maintaining their equipment.
The Iran situation doesn't change the base case. It just adds a catalyst that wasn't in any analyst's model three weeks ago.
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**The spinoff**
September 24, 2025: KBR's board approved spinning off MTS as a standalone public company. Target mid- to-late 2026, tax-free to shareholders. Goldman Sachs advising (btw they bought \~ $9M worth of stock last quarter, a 34% increase in stake).
Defense investors don't want to own an LNG company and energy investors don't want to own a defense contractor. Bundled together, both groups discount the stock. That goes away when they split.
New KBR (STS) becomes a pure-play energy technology company with \~85 proprietary licensed technologies and over 20% EBITDA margins. SpinCo (MTS) becomes a pure-play defense and government services company with a $23.2B backlog and long-term mission-critical contracts. Each at its own sector multiple implies a combined value well above where the stock trades today.
This was pushed by Irenic Capital Management, a former Elliott executive's fund, which built a 1%+ stake in late 2024 and argued publicly for the separation. KBR announced the spin the following year.
Confidential Form 10 already filed with the SEC. Management confirmed on the Q4 call it's on track.
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**Controversy and political ties**
Before KBR became independent in 2007 it was Halliburton's subsidiary. Dick Cheney ran Halliburton from 1995 to 2000, then became VP. In 2001 the Army awarded KBR the LOGCAP III contract for Iraq without competitive bidding. Congressional testimony from competing contractors said the Army violated procurement law to keep KBR in place.
The major litigations :
Nigeria bribery (1995-2004). KBR paid roughly $200M in bribes to Nigerian officials to win $6B in LNG construction contracts at Bonny Island. In 2009 KBR pleaded guilty to five FCPA violations. Combined Halliburton/KBR settlement was $579M, the largest FCPA settlement by a US company at the time. Former CEO Albert "Jack" Stanley went to prison. Cheney ran Halliburton the entire time. He was never charged.
Iraq War overbilling (2001-2010). Pentagon auditors flagged $553M in questionable billing under LOGCAP III and made 32 fraud referrals. In 2023 KBR paid $108.75M to settle, the largest Iraq War fraud settlement on record. Whistleblowers proved KBR was ordering new materials while warehouses had decades of surplus inventory. They spent 12 years litigating it after the DoJ declined to join.
Burn pits. Troops and contractors sued over illness and cancer from open-air burn pits KBR operated in Iraq and Afghanistan. Most cases dismissed. The 4th Circuit sent some back to court.
Employee misconduct. Multiple sexual assault cases in Iraq led directly to the Franken Amendment, which banned mandatory arbitration clauses for assault claims on government contracts.
The criminal chapter is closed. Fines paid, leadership replaced. What remains is civil litigation risk and execution risk.
The part that matters for the investment: KBR or its predecessors have held the Army's main logistics contract almost continuously since 1985. Reagan, Bush I, Clinton, Bush II, Obama, Trump term 1, Biden, Trump term 2. Six presidents, seven terms, both parties.
Survived $579M in criminal fines. Survived the Iraq fraud settlement. Survived Congressional hearings. Survived HomeSafe. The military kept renewing each time.
The US Army can't run forward logistics in active theatres without KBR. Competitors have been trying to displace them for decades. The GAO rejected a competitor protest in February 2026 under this administration, same as every previous one.
Bear take: too embedded to be held accountable, limited pricing power. Bull take: the closest thing to a real moat they have, and it survived things that would have ended most defense contractors.
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**Risks**
Execution. HomeSafe proved KBR can badly mishandle a contract. They win on relationships and delivery, not structural lock-in. One more major screwup reprices the stock.
Four consecutive revenue misses. All explained, but the chart is the chart.
Class action lawsuit. Investors who bought between May 6 and June 19, 2025 are suing, claiming management misled them before the HomeSafe cancellation. Buying today puts you outside the class period. Settlement probably $80-200M against a $5B+ market cap.
Government spending. 57% of revenue is US government. Most of it is defense and space, not civilian agencies. DOGE cuts go after federal civilian budgets, not F-18 programs.
Lake Charles LNG pause. Energy Transfer paused the Lake Charles LNG project, affecting STS near- term JV contribution. Real headwind for STS optics in 2026 but latest geopolitics moves maybe rewrite it as a vital interest project and put it back on tracks.
Spinoff execution. MTS CEO search is ongoing, Mark Sopp is interim. Management distracted for 12- 18 months.
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**Price targets**
| Scenario | Target | From $40 |
| Conservative | $45-50 | +12-25% |
| Base (DCF / analyst avg) | $54-61 | +35-52% |
| Analyst median | $64-67 | +60-67% |
| Bull (re-rating + spinoff) | $75-80 | +87-100% |
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**Why I’m bullish**
The valuation discount has a specific cause. The business didn't deteriorate, one contract failed. Every profitability metric improved in 2025. Margins expanded. Backlog hit a record. Cash conversion was 110%. The business got better the same year the stock got destroyed.
The $900M is proven to be priced in already. KBR said HomeSafe wouldn't hurt EBITDA, then delivered on that through the cancellation. That test happened and they passed it. The stock didn't recover. That's the opportunity.
The spinoff is not a rumor. The Form 10 is filed with the SEC. Goldman is advising. The activist that pushed for it came from Elliott. Separating two unrelated businesses that trade at a conglomerate discount into their natural investor bases tends to work. Both segments are good businesses that are being discounted for being bundled together.
The contract wins since January show the DoD relationship is intact. Over $3.5B in 9 weeks including a $3.1B LOGCAP extension that survived a GAO protest. If HomeSafe had structurally damaged KBR's standing with the government you wouldn't be seeing this.
The controversy section is actually part of the bull case. A company that survived $579M in criminal fines, an Iraq fraud settlement, Congressional hearings, and a botched $900M contract, and still has the Army extending its LOGCAP and the GAO rejecting competitors, is not a company the government is walking away from. Forty years of that relationship surviving everything is worth something.
None of the catalysts need to happen simultaneously. Re-rating to KBR's own historical P/E gets you to $66. The spinoff alone unlocks the conglomerate discount. EPS compounding at current rates makes $40 look cheap by 2027 on its own.
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**Sources**
1. KBR Spinoff Investor Page — [https://investors.kbr.com/news-and-events/spin-off-information/](https://investors.kbr.com/news-and-events/spin-off-information/)
2. Q4 2025 Earnings Summary (Yahoo Finance) — [https://finance.yahoo.com/news/kbr-q4-earnings-call-highlights-143809247.html](https://finance.yahoo.com/news/kbr-q4-earnings-call-highlights-143809247.html)
3. Irenic Capital (CNBC) — [https://www.cnbc.com/2025/01/18/irenic-takes-a-position-at-kbr-how-the-activist-may-improve-shareholder-value.html](https://www.cnbc.com/2025/01/18/irenic-takes-a-position-at-kbr-how-the-activist-may-improve-shareholder-value.html)
4. Irenic/Spinoff Background (Yahoo Finance) — [https://finance.yahoo.com/news/kbr-kbr-stock-trades-why-160115626.html](https://finance.yahoo.com/news/kbr-kbr-stock-trades-why-160115626.html)
5. KBR Spinoff — WashingtonExec — [https://washingtonexec.com/2025/09/kbr-announces-plan-to-spin-off-mission-technology-solutions/](https://washingtonexec.com/2025/09/kbr-announces-plan-to-spin-off-mission-technology-solutions/)
6. Nigeria Bribery — DOJ (2009) — [https://www.justice.gov/opa/pr/kbr-inc-pleads-guilty-foreign-bribery- charges-and-agrees-pay-402-million-criminal-fine](https://www.justice.gov/opa/pr/kbr-inc-pleads-guilty-foreign-bribery-%20charges-and-agrees-pay-402-million-criminal-fine)
7. Iraq Fraud Settlement — DOJ (2023) — [https://www.justice.gov/opa/pr/kbr-pay-1087-million-resolve- false-claims-act-allegations-related-iraq-war-contracts](https://www.justice.gov/opa/pr/kbr-pay-1087-million-resolve-%20false-claims-act-allegations-related-iraq-war-contracts)
8. LOGCAP History — Congressional Research Service — [https://sgp.fas.org/crs/natsec/RL33834.pdf](https://sgp.fas.org/crs/natsec/RL33834.pdf)