Oct. 30--Houston-based KBR beat Wall Street profit expectations but still reported a 14 percent drop in its third-quarter profit as its U.S. government work declined.

The engineering and construction giant reported net income of $73 million, or 45 cents per share, down from $85 million, or 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 polled by Thomson Reuters forecast earnings of 41 cents on $2.92 billion in revenue. 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 22 percent, from $1.75 billion to $1.37 billion, and net income down from $104 million to $89 million.

That drop was largely from the Logistics Civil Augmentation Program, or 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 rose in KBR's upstream business, from $550 million to $735 million, but net income went from $53 million to $48 million.

The company took a $25 million charge related to problems at three liquefied natural gas projects including equipment failures and schedule delays. KBR's CEO, William Utt, said he does not expect those issues to affect earnings further.

"Despite the charges taken this quarter, all of KBR's current LNG projects remain profitable," Utt told analysts on a conference call.

KBR's backlog of work grew to $13.5 billion at the end of the quarter from $12.3 billion three months earlier.

In its note, Jefferies & Co. said it expects the company to continue to diversify its business away from government services.

Shares of KBR closed down 64 cents at $20.57.

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