Ahead of the Bell: KBR

All Associated Press news

HARTFORD, Conn. (AP) - Profit could decline significantly at KBR Inc. this year with the exit of U.S. troops from Iraq, an analyst said Monday as he downgraded the military contractor.

Analyst Barry Bannister of Stifel, Nicolaus downgraded the Houston company to "Hold" from "Buy."

"Based on the rapid withdrawal from Iraq, we believe KBR faces the loss of (about) 23 percent of current year profits attributable to U.S. Middle East military work within at most two years," he said in a note to investors.

President Barack Obama told Iraqi Prime Minister Nouri al-Maliki in a meeting in Washington last week that he plans to stick to the U.S. plan for a complete withdrawal from Iraq by the end of 2011.

In contrast, work in Afghanistan, which is the subject of strategy sessions by Obama and his military and foreign policy advisers, has been awarded to competitors for KBR, Bannister said.

Bannister had other concerns about KBR, saying he is "quite weary of the mixed signals received from KBR regarding the projected profitability of large petroleum projects in which KBR is involved."

He cited a $1 billion energy project for KBR in the Gorgon gas field project off the northwest coast of Western Australia.

Bannister said he needs "additional clarity" to determine the extent to which smaller projects can make up a possible gap if profits don't materialize in large projects.

KBR is scheduled to release its third-quarter profit before the market opens Thursday.

Shares fell 73 cents, or 3 percent, to $23.29 in premarket trading

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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