We recently published a list of 10 Best Engineering Stocks to Buy for 2025. In this article, we are going to take a look at where KBR Inc. (NYSE:KBR) stands against other engineering stocks to buy for 2025.
Overview of the Engineering Industry
The engineering industry is playing an increasingly significant role in today’s tech-supported world. The demand for engineering solutions is increasing globally, and this trend is expected to continue into 2025. Investments in clean energy, urban development, and transportation are driving this demand, presenting a scalable opportunity for investors to benefit from engineering companies’ potential.
According to a report by Mordor Intelligence, the global engineering services industry has remained resilient over the years, with a market size worth $1.67 trillion as of 2024. It is expected to grow to $2.04 trillion by 2029 at a compound annual growth rate (CAGR) of 4.20% between 2024 and 2029. Although the largest market for the engineering services industry is centered in the Asia Pacific region, the Middle East and Africa are showing the fastest market growth globally.
This growth is attributed to various factors, including infrastructure development, technological advancements, demand for sustainable solutions, and the need for specialized skills in infrastructure programs. Since infrastructure projects are complicated and strenuous, the demand for innovative engineering services continues to grow. In fact, data from the US Census Bureau shows that the value of infrastructure building in the US rose from $1.80 trillion to $1.84 trillion between October 2022 and February 2023. The surge in the use of digital technologies such as artificial intelligence, cloud computing, and IoT is another primary force driving the market.
Thus, the engineering sector stands out as a promising investment opportunity due to technological advancements, resilience to economic fluctuations, supportive government initiatives, and strong market demand.
The construction industry experienced a 10% increase in nominal value added and a 12% growth in gross output in 2024. According to Deloitte, construction spending surpassed $2 trillion in the US in 2024. Its employment level touched 8.3 million in July 2024, exceeding its previous high of 7.7 million in 2006. These numbers have been consistently increasing for more than a year. Similarly, the Dodge Momentum Index (DMI), which measures nonresidential building spending, was on an upward trajectory in fiscal Q2 2024. This reflects increasing confidence in market conditions among developers and owners.
Deloitte’s 2025 Engineering and Construction Industry Outlook states that there are reasons to be optimistic in 2025. The company’s analysis of the Oxford Economic Model shows that short-term interest rates are likely to fall gradually over the coming years, followed by interest rate cuts by the Federal Reserve. The improving financial and economic conditions are anticipated to positively influence construction and engineering demand across various segments.
Declining mortgage rates may also increase demand and residential construction activity. Other drivers of growth in segments such as manufacturing, engineering, and energy may include government investments through the Infrastructure Investment and Jobs Act (IIJA), the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, and the Inflation Reduction Act (IRA).
Our Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 30 engineering stocks. We then selected the 10 stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An engineer wearing protective gear overlooking a research and development laboratory.
KBR Inc. (NYSE:KBR)
Number of Hedge Fund Holders: 53
KBR, Inc. (NYSE:KBR) delivers engineering, science, and technology solutions to companies and governments worldwide. Its Government Solutions segment provides solutions to intelligence, defense, aviation, space, and other missions for military and other government agencies, primarily in the US, UK, and Australia. In addition, its Sustainable Technology Solutions segment operates a portfolio of over 80 sustainability-focused process technologies.
KBR Inc. (NYSE:KBR) is running on a strong profitability model. Its fiscal Q3 2024 reported double-digital year-over-year growth across all its key metrics, with group revenue up 10% year-over-year. The company closed on its LinQuest acquisition and is carrying out the integration process. LinQuest has performed profitably since closing, winning over $60 million of new work and delivering solid results.
On December 16, the company announced that it had been awarded around $445 million cost-plus-fixed-fee contract under the Department of Defense Information Analysis Center’s (DoD IAC) multiple-award contract (MAC) vehicle. Awarded by the US Air Force’s 774th Enterprise Sourcing Squadron, the DoD IAC MAC task orders aim to develop and create new knowledge to enhance the DTIC repository and the R&D and S&T community. The work is expected to be performed across various DoD locations over five years.
Cove Street Capital Small Cap Value Fund stated the following regarding KBR, Inc. (NYSE:KBR) in its Q2 2024 investor letter:
“On the plus side, KBR, Inc. (NYSE:KBR) has been a strong performer so far YTD on the back of an investor day in the second quarter that highlighted the success of the last four-year plan (2020-2023) before laying out ambitious but credible targets for the next 4 years (2024- 2027). Since 2020, KBR has pivoted its commercial business away from high-risk EPC projects to a more differentiated IP-first consulting approach that now sees 20% EBIT margins and contributes 40% of its overall profitability. KBR has cleaned up its balance sheet by settling convertible notes and warrants and now sits at a healthy 2x net leverage. With the upcoming ramp of a $20B government services contract with the US army, the company is well positioned to generate cash and return value to shareholders.”
Overall, KBR ranks 2nd on our list of engineering stocks to buy for 2025. While we acknowledge the potential of engineering stocks, our conviction lies in the belief that 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 but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
