What happened

Shares of oil and gas engineering firm KBR, Inc. (NYSE:KBR) closed the day 15.6% lower on Friday after reporting Q4 earnings that fell short of estimates.

KBR earned $1.94 per share when calculated according to GAAP accounting standards, but Wall Street was focused more on the company's pro forma earnings, which came to just $0.28 per share -- $0.02 shy of estimates. Sales of $937 million in the quarter likewise missed the mark, lagging Street projections for sales of $973.7 million.

Two cartoon men reacting confused and surprised as a stock chart falls through the floor.

Wait! I thought we weren't supposed to care about earnings if guidance was good!? Image source: Getty Images.

So what

Despite "missing earnings," KBR management characterized its quarter as "strong," emphasizing "positive results throughout this year in terms of earnings and improved cash flow, meeting or exceeding what we set out to achieve at the beginning of the year." And Q4 certainly was an improvement over last year's fourth quarter.

Although KBR experienced a 17.5% decline in sales, it reversed its year-ago loss from operations, earning $27 million pre-tax. A big income tax benefit further inflated earnings on the bottom line, leaving KBR with the aforementioned per-share profit of $1.94 per share, diluted -- much better than last year's $0.61 per-share loss.

For the full year, the news was even better. Sales actually grew about 2% year over year and full-year profits were $3.06 per share versus a $0.43 per-share loss in 2016.

Now what

Looking ahead to 2018, KBR says investors can expect the company to earn $1.35 to $1.45 per share "adjusted" and not including $0.07 per share of "legacy legal costs for U.S. Government contracts." Subtracting those amounts from guidance leaves management expecting total per-share profits of between $1.28 and $1.38.

Granted, Wall Street is looking for $1.37 per share. Considering that this is probably a pro forma forecast, it looks likely that KBR's guidance is ahead of analyst estimates for the year to come -- which makes Friday's sell-off in response to this news all the more curious.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.