Oct. 29--Houston-based KBR beat Wall Street profit expectations, but still reported a 14 percent drop in third-quarter profit as its U.S. government work declined.

The engineering and construction giant reported net income of $73 million, 45 cents per share, down from $85 million, 51 cents per share, in the July-September period in 2008. The company noted that last year's results included a 7 cents-per-share boost from the sale of its stake in an overseas business unit.

Analysts had expected earnings of 41 cents per share, according to a note to investors from Jeffries & Co.

Revenue for the third quarter was $2.8 billion, down from $3 billion a year ago.

The largest business unit by revenue, government and infrastructure, saw revenue drop from $1.75 billion to $1.37 billion and net income down from $104 million to $89 million.

The drop was largely from the Logistics Civil Augmentation Program (LogCAP)contract under which the company has provided U.S. forces in Afghanistan, Iraq and Kuwait with dining facilities, transportation, sanitation systems and other critical services. The drop off correlated with changes in troop deployments by the Department of Defense, the company said.

Revenue increased in KBR's upstream business, from $550 million to $735 million, but net income was down from $53 million to $48 million.

In its note, Jeffries & Co. said it was good news to see no major project cancellations in KBR's backlog of work, meaning the future outlook remains strong. Jeffries also expects the company to continue to diversify its business away from the government services field.

tom.fowler@chron.com

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