11:09 AM EDT, 07/02/2025 (MT Newswires) -- KBR (KBR) faces mounting hurdles in its government segment amid an "extended period of bookings uncertainty" following the cancellation of a major defense contract, UBS Securities said Tuesday in a report.

UBS cited a series of recent setbacks, including the cancellation of the HomeSafe contract by the Department of Defense, which had the potential to generate $2 billion annually at full run-rate post-2027.

Additional headwinds include declines in the U.S. European Command component of the Readiness & Sustainment business and a lost recompete on the Tactical Exploitation of National Capabilities program

"Unsettled policy direction" and closer scrutiny by the Department of Government Efficiency triggered a "DOGE effect on decision making," the report said.

UBS lowered its 2026 adjusted earnings estimate to $3.90 from $4.10 a share and expects KBR to revise guidance downward. While momentum may rebound as early as Q3, "there is a fairly equal risk of further negative developments before positive ones emerge," the report said.

UBS downgraded KBR's stock to neutral from buy and lowered its price target to $54 from $66.

KBR shares fell 3% in recent Wednesday trading.

Price: 46.69, Change: -1.47, Percent Change: -3.04