KBR, Inc. (KBR): what the price assumes

boothcheck covers KBR, Inc. (KBR) but does not put one priced-in number on it: here the defensible answer is the evidence rather than a point estimate. boothcheck publishes no house fair value, target price, or buy/sell rating. Narrative composed 2026-06-27.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/KBR

Headline

FieldValue
TickerKBR
CompanyKBR, Inc.
Current price$38.03/sh
CompositionScience & Space 14% / Defense & Intel 41% / Readiness & Sustainment 16% / Sustainable Technology Solutions 28%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin (value-band context)4.2%
Operating margin today9.5%
Margin compression (value-band)-5.3pp
Multiple paid10x operating income

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 7% sits below it).

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history-0.32σ
cohort percentile (of 225 peers)6

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.05x5expensive
Earnings1.06x3expensive
Relative0.38x2justifies
Growth1.32x2expensive

Families that justify the price: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.1%); the inversion above states its own rate.

Per-Model Detail (n=12)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$0.00—noNegative/zero FCF — equity value floored at $0
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative——noP/E 18x (static sector reference · 2026-04), scenarios: 15.2x / 18.0x / 20.8x (bear / base = reference held flat / bull), EV/EBITDA 12x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$47.260.80xyesStage 1: 20% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$36.361.05xyesBV/sh $12.98, ROE (TTM) 25.9%, ke 9.3%
Two-Stage Excess ReturnAsset$61.430.62xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$20.761.83xyesRev $7.7B, growth -4% (input: historical growth; tapered), Terminal P/S: 0.5x / 0.6x / 0.7x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$83.160.46xyesEPS $3.32, growth 25% (input: historical EPS growth), PEG=0.45 (Undervalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$31.631.20xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.56B × (1−28%) / WACC 6.1% → EPV (no growth)
Residual IncomeAsset$54.100.70xyesBV $12.98 + 5yr PV of (ROE (TTM) 25.9% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$31.141.22xyes√(22.5 × EPS $3.32 × BVPS $12.98) — Graham's conservative floor
EV/EBITDA RelativeRelative——noEBITDA $0.91B × sector EV/EBITDA 12.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$107.130.35xyesEPS $3.32 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$6.276.07xyesBV $12.98 × (ROIC 3.0% / WACC 6.1%)
P/Sales SectorRelative——noRevenue $7.69B × sector P/S 2.5x
PEG Fair ValueRelative$124.500.31xyesEPS $3.32 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x
Earnings YieldEarnings$35.891.06xyesEPS $3.32 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

UnitRoleValuation basisRevenueReported profitValue evidenceStatus
Mission Technology Solutionsoperatingenterprise$5.6b$463.0m operating-incomewithheldunresolved no unit value
Sustainable Technology Solutionsoperatingenterprise$2.2b$477.0m operating-incomewithheldunresolved no unit value

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

FieldValue
Net debt$2.2b
Net debt / NOPAT (after-tax)4.26x
Net debt / operating income (pre-tax)3.06x
Interest coverage5.0x
Share count CAGR (buyback)-5.0%
Burning cashno

Bullet Takeaways

Bull Case

One number anchors the bull case: 91% of this year's government-services revenue target is already under contract, and 67% of the Sustainable Technology revenue target as well. That coverage is what makes KBR a different kind of cyclical from a homebuilder or a commodity name. Its revenue is bought before the year starts, sitting in a backlog of $18.5 billion in government services alone, refilled at a 1.0x book-to-bill. When most of the year's revenue is already signed, the question is execution and margin, not demand, and that visibility is worth a great deal in a business otherwise tied to government budgets.

The higher-quality half of the company is the Sustainable Technology Solutions arm, and it is where the real margins live. STS licenses proprietary process technology into energy and industrial markets, an asset-light model that earns a 21.9% adjusted EBITDA margin on $4.7 billion of backlog, more than double the government-services margin. This is intellectual property at work: once a customer builds a plant around KBR's licensed process, the relationship throws off recurring fees and follow-on work. The company is investing to deepen it, taking a strategic stake in UK-based Applied Computing to add AI-enabled capability to the technology platform.

The valuation reflects a business the market has soured on, not one in trouble. KBR trades at roughly nine times operating income, and the asset-value, earnings-power, and peer-multiple methods all land at or above the price, with peer multiples reading it as notably cheap. The company is buying back stock, shrinking the share count about 2.4% a year, and generating rising operating cash flow with stronger conversion. The clearest expression of management's view that the parts are worth more than the whole is the plan to separate the two businesses, which would let the market value the high-margin technology licensor on its own terms rather than blended with lower-margin government services. A company with contracted revenue, a hidden high-margin segment, and a credible catalyst to surface its value is doing more than its depressed multiple suggests.

Bear Case

The uncomfortable truth a holder has to face is qualitative before it is numerical: KBR's biggest customer can choose to do the work itself. The company's filing states plainly that it competes "with the U.S. government's own capabilities", and that is not an abstract risk. Management's own 2026 guidance assumes a modest second-half decline in NASA-related revenue due to potential workforce in-sourcing directives. When your customer is also your competitor and controls your contracts, a policy shift in Washington can remove revenue that no amount of operational excellence can defend. KBR depends on U.S. and foreign government agencies as its primary customers in the government-services segment, and government priorities, not market demand, set the size of that opportunity.

That dependence is already showing up in the numbers. First-quarter revenue fell 5% to $1.9 billion, driven by the expected runoff of EUCOM work and lower U.S. government activity, and net income declined 12% to $102 million. The backlog coverage cushions the near term, but a backlog that refills at exactly 1.0x book-to-bill is treading water, not growing, and the government-services margin near 10.6% leaves little room to absorb pricing pressure from the smaller, specialized competitors KBR says concentrate their resources on particular areas.

The leverage is the other constraint. Net debt of about $2.2 billion sits at roughly 3 times trailing operating income, with interest coverage near 4.9 times, manageable but meaningful for a business whose top line is declining and whose largest segment is exposed to budget risk. The planned separation, while a potential value catalyst, also carries execution and dis-synergy risk, and splitting a leveraged company into two pieces requires allocating that debt carefully. The reason the methods read the stock as cheap is the same reason it is cheap: the market is discounting a government-services business in slow runoff, with a customer that can in-source, and is waiting to see whether the separation actually unlocks the technology segment's value or simply creates two smaller companies carrying the same risks.

Valuation

KBR is a value-supported name, with one telling exception. At roughly nine times operating income, the asset-value, earnings-power, and peer-multiple methods all land at or above the price, while only the forward-growth method reads it as expensive. That is the inverse of a growth-premium stock: the static methods say the business is worth at least what you pay, and only crediting future growth makes it look stretched. For a company whose revenue is currently declining, that pattern makes sense; the market is pricing the runoff, not a growth story.

The most useful comparison is to the peers, where the discount is sharpest. KBR trades well below where engineering and government-services peers fetch on a multiple basis, which is the market's way of saying it views KBR's revenue mix, the government dependence and the NASA in-sourcing risk, as lower quality than the headline backlog suggests. The counterweight is the Sustainable Technology segment, whose 21.9% margins and proprietary licensing model would command a far higher multiple on its own, which is precisely the logic behind the planned separation. The blended valuation undervalues the technology arm and arguably fairly values the services arm; splitting them is the mechanism to resolve that.

Solvency is the constraint to weigh against the cheapness. Net debt of about $2.2 billion at roughly 3 times operating income, with interest coverage near 4.9 times, is sustainable while cash flow holds but limits flexibility if government revenue keeps declining. The genuine question the price raises is not whether KBR is cheap on today's earnings; the methods say it is. It is whether the government-services business stabilizes and whether the separation surfaces the technology segment's value before the runoff and the leverage erode the case.

Catalysts

The first quarter was a margin-up, revenue-down print. KBR reported revenue of $1.9 billion, down 5% on EUCOM runoff and lower U.S. government work, with net income of $102 million, down 12%, and operating margin of 9.4%. Adjusted EBITDA rose 1% to $251 million at a 13.1% margin and adjusted EPS was $0.96, with stronger operating cash flow. The two segments diverged: Mission Technology Solutions revenue fell 6% but lifted its adjusted EBITDA margin to 10.6% on international defense growth, while Sustainable Technology Solutions revenue fell 2% but reached a 21.9% adjusted EBITDA margin.

The biggest forward item is structural: management announced plans to separate the company into its two segments, which would let the market value the high-margin technology licensor independently of the government-services arm. KBR reaffirmed 2026 guidance, with work under contract covering 91% of government-services and 67% of Sustainable Technology revenue targets, while assuming a modest second-half decline in NASA-related revenue from potential workforce in-sourcing, expected to be offset by mid-teens growth in Sustainable Tech. The catalysts to track are progress on the separation, the NASA in-sourcing decision, and book-to-bill, the cleanest signal of whether the backlog is growing or merely holding.

Peer Cohorts (Per Segment, With Filing Citations)

Mission Technology Solutions (reported)

Sustainable Technology Solutions (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 guidance · Q1 2026 earnings release · Q1 2026 earnings call

View the full interactive KBR report on boothcheck