July 29, 2010 / 11:24 AM / 7 years ago

UPDATE 2-KBR Q2 profit rises, stock down as new orders slow

3 Min Read

* Q2 EPS 66 cts vs estimated 58 cts; Revenue down 14 pct

* Backlog down to $12.4 bln from $13.3 bln at end-March

* Raises 2010 EPS view to $1.75-$2.00

* Shares down 1.6 pct as raised guidance largely expected (Adds executive and analyst comments, updates share price)

By Braden Reddall

SAN FRANCISCO, July 29 (Reuters) - KBR Inc's (KBR.N) quarterly profit beat Wall Street estimates on Thursday as hydrocarbons revenue and job income rose, and the engineering company raised its 2010 outlook, but its stock fell as orders were sluggish.

The company now expects full-year profit of $1.75 to $2.00 a share, as had been widely expected since it retained a key U.S. military contract in Iraq.

In February, KBR forecast earnings of $1.50 to $1.80 a share, but analysts had already been expecting $1.74.

Tudor Pickering Holt pointed to "sluggishness" in orders, as KBR's backlog fell to $12.4 billion from $13.3 billion three months before and $14.1 billion at the start of 2010.

Chief Executive Bill Utt, anticipating a more "measured" pace of growth in its markets, highlighted efforts to improve KBR's profitability as it does more engineering on liquefied natural gas (LNG) projects and less military logistics work.

"We are expecting the sales environment for the second half of 2010 to be much improved from the first six months of this year," Utt told analysts on a conference call.

Second-quarter net profit rose to $106 million, or 66 cents a share, from $67 million, or 42 cents a share, a year before. Revenue fell 14 percent to $2.67 billion, including an expected drop in the North American government and defense business.

Analysts had expected profit of 58 cents a share on revenue of $2.63 billion, according to averages on Thomson Reuters I/B/E/S.

The Houston-based company got a lift in May when the U.S. Army opted to stick with it for supply of troops in Iraq until their scheduled withdrawal at the end of 2011. [ID:nN06124199]

KBR now expects a 40 percent decline in U.S. military revenue in 2010, compared with 50 percent before. But it has sketched out ambitious plans for growth beyond military contracts, including power and industrial projects, LNG terminals and minerals engineering. [ID:nN23249689]

Shares of KBR were down 1.6 percent at $21.96 on the New York Stock Exchange in early afternoon. The stock is still up more than 16 percent in 2010, versus a 6 percent gain for larger rival Fluor Corp (FLR.N). (Reporting by Krishna N. Das in Bangalore and Braden Reddall in San Francisco; Editing by Vinu Pilakkott and Matthew Lewis)

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