KBR, Inc. (KBR): A Bull Case Theory

We came across a bullish thesis on KBR, Inc. on Value Don't Lie’s Substack. In this article, we will summarize the bulls’ thesis on KBR. KBR, Inc.'s share was trading at $42.64 as of February 4th. KBR’s trailing and forward P/E were 13.05 and 10.28 respectively according to Yahoo Finance.

KBR, Inc. provides scientific, technology, and engineering solutions to governments and commercial customers worldwide. KBR has declined roughly 26% over the past year, leaving the stock trading at a notable discount ahead of a planned spin-off of its government services business in the second half of 2026. At approximately 12x earnings and 8x EBITDA, KBR trades well below comparable government contractors, which typically command mid-to-high teens earnings multiples.

In September 2025, the company announced plans to separate its Mission Technology Solutions (MTS) segment, a traditional government contractor serving primarily U.S., U.K., and Australian agencies, from its Sustainable Technology Solutions (STS) segment, which will remain the core business. While MTS has faced recent challenges, including the loss of the TRANSCOM contract and other operational missteps that pressured revenue visibility, the earnings and cash flow impact has been limited, and backlog trends are beginning to stabilize.

The more compelling aspect of the story lies in STS, which represents the company’s crown jewel. STS combines consulting services and proprietary technology licensing, generates double-digit revenue growth, and delivers 20%+ EBITDA margins with minimal capital intensity. The segment holds a dominant position in ammonia technology and is well positioned to benefit from rising global demand for low-carbon and energy-transition infrastructure. Comparable transactions in adjacent markets support premium valuation multiples for this type of asset.

A sum-of-the-parts analysis suggests that separating MTS and STS could unlock material value, even when applying conservative multiples and assuming dis-synergies. On a trailing basis, implied equity value points to roughly 30% upside, with additional optionality from future growth and capital allocation. As the spin-off approaches and operational noise fades, KBR’s valuation discount appears increasingly difficult to justify, creating an attractive risk-reward setup for investors willing to look ahead to the post-separation structure.

Previously, we covered a bullish thesis on KBR, Inc. (KBR) by Will Powers in January 2025, which highlighted the company’s sum-of-the-parts discount, activist involvement, and upside from a potential breakup of its MTS and STS segments. KBR’s stock price has depreciated by approximately 23.59% since our coverage. Value Don’t Lie shares a similar view but emphasizes the confirmed spin-off timeline and valuation reset.

KBR, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held KBR at the end of the third quarter which was 51 in the previous quarter. While we acknowledge the risk and potential of KBR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KBR and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.