KBR, Inc. Reports Strong Fiscal 2025 Results, Plans Mission Technology Solutions Spin-Off, and Issues Upbeat 2026 Guidance

Key Highlights from the Report

• Fiscal 2025 Revenues: \$7.8 billion, up 1% year-over-year
• Net Income Attributable to KBR (FY25): \$415 million, up 11%
• Operating Income: \$778 million, up 18% with a 10.0% margin
• Adjusted EBITDA: \$968 million, up 12% with a 12.4% margin
• Diluted EPS: \$3.21, up 15%; Adjusted EPS: \$3.93, up 18%
• Bookings and Options: \$11.1 billion, maintaining a 1.0x book-to-bill ratio
• Q4 2025 Results: Revenue \$1.9 billion (down 11%), Net Income \$111 million (up 46%), Adjusted EBITDA \$238 million (up 5%)
• Backlog and Options (Quarter End): \$23.2 billion, up 13% from prior year
• 2026 Guidance: Midpoint revenue guidance of \$8.13B (+4%), Adjusted EBITDA \$1.01B (+4%), Adjusted EPS \$4.05 (+3%)
• Spin-Off Announcement: KBR will separate its Mission Technology Solutions (MTS) segment into a standalone public company in 2H 2026
• Dividend: Raised to \$0.165 per quarter (annualized \$0.66)
• Liquidity: \$1.1 billion as of January 2026; Net leverage improved to 2.2x

Detailed Review for Investors

Fourth Quarter and Full-Year 2025 Financial Performance

KBR, Inc. (NYSE: KBR) delivered strong operational and financial results in fiscal 2025, demonstrating disciplined execution in a challenging market. Despite an 11% decline in Q4 revenue, primarily due to a slower pace of contract awards and reductions in certain contingency scopes, the company significantly grew its profitability:

• Q4 operating income surged by 36% to \$191 million, driven by increased equity earnings from unconsolidated affiliates, lower SG&A expenses, and a \$26 million contract dispute resolution.
• Q4 net income attributable to KBR rose 46% to \$111 million, reflecting the operating improvements and lower interest expenses.
• Q4 diluted EPS increased 53% to \$0.87, also benefiting from share repurchases that reduced the share count.
• Q4 Adjusted EBITDA margin improved 190 basis points to 12.6%, highlighting effective cost management and favorable project mix.

For the full year, the company increased revenues to \$7.8 billion (+1%), delivered \$415 million in net income (+11%), and expanded operating income and adjusted EBITDA by double digits. Bookings and options of \$11.1 billion kept the book-to-bill ratio at a healthy 1.0x, and the backlog and options grew 13% year-over-year to \$23.2 billion, providing strong revenue visibility for 2026.

Segment Performance

Mission Technology Solutions (MTS)

• Revenues: \$5.6 billion (flat year-over-year), but Q4 revenues fell 14% due to EUCOM reductions and procurement delays in the U.S. defense/intel market.
• Q4 Operating Income: \$118 million, up 44% (benefiting from a contract dispute resolution and SG&A savings).
• Q4 Adjusted EBITDA: \$145 million, up 4%; margin rose to 11.2%.
• Backlog and Options: \$19.1 billion (up 15% YOY), though Q4 book-to-bill was 0.5x due to contract timing.
• Significant New Awards:
  • \$117M cost-plus contract for F/A-18 and EA-18G support (NAVWAR)
  • \$350M ceiling technical support contract for USGS
  • \$103M Space Force/Air Force task orders
  • Seats awarded on \$151B SHIELD and \$10B WEXMAC 2.1 IDIQs

Sustainable Technology Solutions (STS)

• Revenues: \$2.2 billion (+2% YOY); Q4 revenues dipped 2% as customers delayed greenfield projects.
• Q4 Operating Income: \$117 million, up 17% (boosted by strong LNG project execution and absence of prior year project losses).
• Q4 Adjusted EBITDA: \$121 million, up 3%; margin increased to 20.5%.
• Backlog: \$4.2 billion, up 5%; Q4 book-to-bill at 1.6x reflecting robust new awards.
• Major New Awards:
  • 10-year digital maintenance contract for Petro Rabigh (Saudi Arabia)
  • Integrated field management for Iraq’s Majnoon Oil Field
  • Engineering services for Qatar’s Bul Hanine field
  • Engineering for ENKA (Iraq), IGNIS (Spain, green ammonia), Fikrat Al-Tadweer (Saudi Arabia, green methanol), and Coastal Bend LNG (Texas)
• Strategic M&A: Joint venture Brown & Root acquired SWAT, creating a leading specialty welding and turnarounds provider in North America.

Balance Sheet, Capital Return, and Cash Flow

• Liquidity: \$1.1 billion at year-end 2025 (\$605M revolver capacity + \$500M cash)
• Net Leverage: Reduced to 2.2x from 2.6x last year, reflecting improved profitability and cash flow
• Operating Cash Flow (FY25): \$557 million, up 24% year-over-year
• Capital Returned to Shareholders (Q4): \$46 million (\$25M buybacks, \$21M dividends)
• Dividend Raised: Quarterly dividend set at \$0.165 per share (\$0.66 annualized)

2026 Outlook and Guidance

KBR issued robust fiscal 2026 guidance, reflecting its strong backlog and improving award momentum:

Management expects capital expenditures of \$40-50 million, an effective tax rate of 26-28%, and plans for the spin-off of MTS to be completed in the second half of 2026.

Planned Spin-Off of Mission Technology Solutions (MTS)

This is a potentially price-sensitive and highly significant development: On September 24, 2025, KBR announced its intent to spin off the MTS business into a separate, publicly traded U.S. company. The spin is designed to enhance the strategic focus, operational independence, and financial flexibility of both KBR and the new MTS company.

• The spin-off is intended to be tax-free for U.S. shareholders and is targeted for completion in 2H 2026, subject to final Board and regulatory approvals.
• Perimeter changes for 2026, including the transfer of Frazer-Nash Consultancy and the UK Civil Nuclear portfolio to STS, will be reflected in future SEC filings.

Shareholders should note: The separation will create two pure-play companies, potentially unlocking shareholder value and attracting different investor bases. Additional details are available on the company’s investor relations website.

Risks and Forward-Looking Statements

KBR cautions that its outlook is subject to risks including government funding delays, changes in U.S. and international defense budgets, geopolitical uncertainty (Russia/Ukraine conflict, Middle East unrest), cost management on fixed-price projects, regulatory changes, and the successful completion of the planned spin-off among others. For a comprehensive list of risks, investors should review KBR’s 10-K, 8-K, and SEC filings.

Conclusion

Bottom Line for Investors:

• KBR is entering 2026 with a record backlog, strong cash flow, disciplined capital management, and a clear plan to unlock value through the spin-off of MTS.
• The spin-off announcement and strong 2026 guidance are likely to be price-moving events, offering potential for significant value creation and greater strategic clarity for both businesses.
• Investors should monitor the spin-off process, updates on contract awards, and any changes in government funding or geopolitical developments that could impact future performance.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors are advised to conduct their own research and consult with financial professionals before making investment decisions. All forward-looking statements are subject to risks and uncertainties as detailed in KBR’s public filings.

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