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Why KBR Stock Popped 17% Today

By Rich Smith - Mar 10, 2020 at 3:30PM

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Better oil prices and moderated capex spending helps support "oil stocks" of all sorts.

What happened

After a historic crash came the bounceback.

Oil prices sank 24% on Monday, sparking a massive sell-off in oil stocks, but with oil prices beginning to bounce back a day later, oil stocks are on the rise again -- and that includes both oil producers and engineering and consulting firms like KBR (KBR 8.06%) that help them do their business.

KBR lost 19% in Monday's market rout, but it got back most of those losses today, closing Tuesday trading up 16.9%.

Oil refinery

Image source: Getty Images.

So what

What factors are helping to push KBR stock up? Most obviously, the rebound in oil prices. Brent crude prices jumped nearly 10% today to close at $37.72 a barrel. West Texas Intermediate crude prices did even better, gaining 10.8% to close at $34.49.  

In addition, and as my fellow Fool and energy specialist Matthew DiLallo pointed out earlier today, a whole series of oil producers announced plans to cut back on their drilling and production activities today. Logically, this should decrease oil supplies and thus help to support oil prices (revenue) even as it reduces the companies' capital spending needs (costs).

Now what

The logical result of that should therefore be stronger profits for oil companies -- or, at least, fewer weak profits than investors were anticipating yesterday. And this, in turn, should permit oil companies to eventually spend more on engineering services KBR provides.

While I'm not 100% certain this news is good enough to justify a 17% one-day spike in KBR's prices, it certainly is good news of a sort -- perhaps even good enough news to persuade some shorts to close out their bets against the company, helping to lift KBR's stock price even further.

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