• Organic Revenue Growth: 14% increase in the third quarter.
• Adjusted EBITDA Growth: 19% year-over-year increase.
• Adjusted Earnings Per Share Growth: 24% increase, reaching $0.83 per share.
• 2024 Adjusted EPS Guidance: Raised to approximately $3.20.
• Free Cash Flow Guidance: Maintained at $225 million to $250 million.
• Government Operations Revenue Growth: 17% increase in the third quarter.
• Government Operations Adjusted EBITDA Growth: 18% increase.
• Commercial Operations Revenue: Modest increase driven by medical and nuclear components growth.
• Capital Expenditures: $40 million in the quarter, $101 million year-to-date.
• 2024 Revenue Guidance: Raised to approximately $2.7 billion.
• 2025 Preliminary Outlook: Mid- to high single-digit growth in revenue, EBITDA, and EPS; at least 10% free cash flow growth.

• Warning! GuruFocus has detected 7 Warning Signs with BWXT.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• BWX Technologies Inc (NYSE:BWXT) reported strong third-quarter results with 14% organic revenue growth, 19% adjusted EBITDA growth, and 24% adjusted earnings per share growth.
• The company raised its 2024 adjusted earnings per share guidance to $3.20, the high end of the previous range, indicating confidence in its financial performance.
• BWXT announced the acquisition of A.O.T., a strategic addition to its special materials portfolio, expected to contribute $40 million in sales in 2024 with mid-teens EBITDA margins.
• Government Operations segment showed robust performance with 17% revenue growth and 18% adjusted EBITDA growth, driven by naval propulsion and technical services.
• BWXT Medical continues to perform well, with year-to-date growth in line with expectations, driven by increased patient volumes and higher contract drug manufacturing volumes.

Negative Points

• Weather-related challenges, including a three-week shutdown of the navy fuel processing facility due to Hurricane Helene, impacted operations and may push some customer payment milestones into 2025.
• The Commercial Operations segment experienced lower field services activity, which partially offset growth in medical and commercial nuclear components.
• The company faces potential risks from supply chain issues, although it has managed these challenges well so far.
• BWXT's free cash flow guidance for 2024 remains at risk due to the timing of contracts and weather disruptions, potentially affecting the upper half of the guidance range.
• The aircraft carrier volume lull is expected to continue through 2025 and possibly into 2026, which could impact naval propulsion revenue growth.

Q & A Highlights

Q: Are supply chain issues at shipyards affecting BWXT, particularly with components like steam turbines for submarines and carriers? A: Rex Geveden, President and CEO, explained that BWXT's build schedule is ahead of the shipyards, providing early visibility into potential supply chain issues. BWXT has managed these challenges well, and they are not currently experiencing significant pressures on their supply chain.

Q: What are BWXT's main competitive advantages in the nuclear space, especially with the renewed interest in nuclear energy? A: Rex Geveden highlighted BWXT's leadership in advanced nuclear fuels, particularly TRISO fuel, and their capability in manufacturing large components like reactor pressure vessels. BWXT's extensive experience in nuclear projects, especially in naval propulsion, further differentiates them from competitors.

Q: Can you provide a timeline for growth in isotopes, microreactors, and SMRs, and when they will significantly impact the P&L? A: Rex Geveden outlined three growth horizons: near-term growth from nuclear medicine and SMRs, mid-term growth from microreactors and AUKUS, and long-term growth from enrichment opportunities and large-scale nuclear reactors for grid applications.

Q: Why does the 2024 guidance imply a sequential decline in EPS from Q3 to Q4, contrary to typical seasonality? A: Robb LeMasters, CFO, explained that some positive factors usually seen in Q4 have been realized earlier in the year, reducing Q4 expectations. Additionally, the impact of the hurricane-related shutdown in Tennessee and typical year-end corporate expenses contribute to the sequential decline.

Q: Regarding the new Navy pricing agreement, does it allow Government Operations EBITDA margins to remain around 20%? A: Rex Geveden confirmed that the pricing agreement is designed to maintain margins in the low to mid-teens initially, with operational excellence driving them higher. Robb LeMasters added that despite mix challenges, underlying performance should help maintain margins.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.