Truist Financial analyst Tobey Sommer maintained a Buy rating on KBR today and set a price target of $60.00.
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Tobey Sommer has given his Buy rating due to a combination of factors surrounding KBR’s strategic decision to spin off its Mission Technology Solutions (MTS) segment. This move is anticipated to unlock significant value by allowing the new KBR, which will consist of the STS business, to trade at a premium multiple compared to current company levels. The separation is expected to result in minimal contract overlap and stranded costs, as the segments have already been operating independently.
Furthermore, the potential for the new KBR to achieve a 16x-20x valuation multiple, despite the lack of direct comparables for the STS segment, adds to the positive outlook. The spin-off is seen favorably by investors, especially following pressure from an activist investor earlier in the year. Although there are some uncertainties regarding leadership for the SpinCo, the current management’s proactive steps in engaging a search firm and the clear asset-light strategy for the STS segment bolster confidence in the transaction’s success.
According to TipRanks, Sommer is a 5-star analyst with an average return of 8.2% and a 59.84% success rate. Sommer covers the Industrials sector, focusing on stocks such as Clean Harbors, Huron Consulting, and KBR.