KeyBanc downgrades KBR to Sector Weight on ’continuing uncertainty’

Investing.com -- KeyBanc Capital Markets downgraded KBR (NYSE: KBR) to Sector Weight from Overweight, flagging ongoing uncertainty surrounding its long-troubled HomeSafe program.

The downgrade follows the U.S. Department of Defense’s (DoD) formal termination of the HomeSafe contract last Wednesday, which KeyBanc described as a pivotal moment that failed to resolve broader investor concerns.

“The constant drip of negative news had picked up in recent weeks as SecDef initiated a review, reintroduced legacy movers, and contemplated cutting military moves by 50% over time,” the broker’s analysts said in a Monday note.

While KeyBanc had been hoping for a swift resolution and a refreshed outlook from KBR’s management in line with its 2024 analyst day, the firm said, “we got one but not the other.”

“To appreciate KBR’s discount valuation, we believe we needed a defensible rebasing of the long-term outlook,” the note said.

Given the current sentiment in the market, KeyBanc believes investors are unlikely to support a name with a “continuing uncertainty” in its forecast, even at a low valuation.

The broker cut its earnings estimates for both 2025 and 2026 and added that further downside revisions may still be necessary.

Meanwhile, KeyBanc reiterated its Overweight rating on Darden Restaurants (NYSE: DRI) and raised the price target to $245 from $230.

The analysts pointed to stronger-than-expected earnings and same-store sales in the fiscal fourth quarter, supported by successful marketing campaigns and digital initiatives.

Darden’s full-year 2026 (FY26) guidance was seen as conservative, and KeyBanc expects its long-term shareholder return framework of 10–15% to remain intact.

KeyBanc believes the company’s performance and outlook justify a valuation at the higher end of its historical range, supported by a “potential acceleration in unit growth and modestly higher expected same-store sales (SSS) growth.”

The revised price target reflects a valuation of approximately 21 times estimated FY27 earnings.

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