Jefferies Downgrades KBR, Notes 'Net Backlog Growth Difficult To Envision'

In a report published Tuesday, Jefferies analyst Luke Folta hypothesized that it is "unlikely" that KBR, Inc. (NYSE: KBR) will generate sufficient awards required to maintain its backlogs in 2015 and 2016.

"Backlog stability through year end 2015 seems unlikely with LNG/O&G prospects pushing out," Folta wrote. "With severe downward pressure on O&G capex and no LNG awards expected in '15 we have a difficult time seeing how KBR's expectation of flat year over year backlog trends is achievable."

Folta calculated that the company's expectations implies a more than doubling of new awards in 2015 to more than $5 billion. The analyst added that of the three major LNG projects the company is targeting, two have been delayed (Pacific Northwest indefinitely and Trunkline into 2016) while Tangguh LNG continues on pace for a potential award in 2016.

Bottom line, Folta argued that while KBR's restructuring initiatives will improve its cost structure, the company needs to realize "robust" orders for earnings per share growth.

Shares were downgraded to Hold from Buy with a price target lowered to $18 from a previous $27.

Shares traded recently at $15.94, down 1.1 percent.