Government and sustainable technology solutions company KBR (NYSE: KBR) missed Wall Street’s revenue expectations in Q4 CY2025, with sales falling 11.2% year on year to $1.89 billion. On the other hand, the company’s outlook for the full year was close to analysts’ estimates with revenue guided to $8.13 billion at the midpoint. Its non-GAAP profit of $0.99 per share was 4.4% above analysts’ consensus estimates.

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“Fiscal 2025 was a year of disciplined execution for KBR as our teams delivered strong operational and financial performance despite a challenging award environment,” said Stuart Bradie, President and Chief Executive Officer.

Company Overview

Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, KBR’s 6.3% annualized revenue growth over the last five years was mediocre. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about KBR.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. KBR’s annualized revenue growth of 6% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

We can better understand the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. KBR’s backlog reached $16.86 billion in the latest quarter and averaged 1.5% year-on-year declines over the last two years. Because this number is lower than its revenue growth, we can see the company hasn’t secured enough new orders to maintain its growth rate in the future.

This quarter, KBR missed Wall Street’s estimates and reported a rather uninspiring 11.2% year-on-year revenue decline, generating $1.89 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

KBR was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.7% was weak for an industrials business.

On the plus side, KBR’s operating margin rose by 6.7 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q4, KBR generated an operating margin profit margin of 10.1%, up 3.4 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

KBR’s EPS grew at an astounding 17.7% compounded annual growth rate over the last five years, higher than its 6.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into KBR’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, KBR’s operating margin expanded by 6.7 percentage points over the last five years. On top of that, its share count shrank by 10.6%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For KBR, its two-year annual EPS growth of 17% is similar to its five-year trend, implying strong and stable earnings power.

In Q4, KBR reported adjusted EPS of $0.99, up from $0.91 in the same quarter last year. This print beat analysts’ estimates by 4.4%. Over the next 12 months, Wall Street expects KBR’s full-year EPS of $3.90 to grow 3.6%.

Key Takeaways from KBR’s Q4 Results

It was great to see KBR’s full-year EBITDA guidance top analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its revenue missed and its EBITDA fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. Still, the stock traded up 2.9% to $42.00 immediately following the results.

Should you buy the stock or not? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).