Insulated from the worst of the COVID-19 pandemic by its large government contracts and a bread-and-butter nuclear Navy business that didn’t shut down in the spring, BWX Technologies posted a modest uptick in both profit and revenue for the second quarter of 2020.
Quarterly net income rose $5 million to about $64 million, or $0.67 per share, from about $59 million, or $0.62 per share, a year ago.
“The core Navy franchise continued to beat our internal expectations through a combination of work volume increases and contract performance improvements driven by operational excellence,” BWXT CEO Rex Geveden stated in a press release accompanying the latest quarterly earnings report.
On a call with investors Tuesday morning, Geveden said BWXT is happy with the dueling versions of the National Defense Authorization Act that Congress has produced this year, either of which should provide enough funding for Virginia-class submarine programs to keep the Nuclear Operations Group stable in the near term. The House act has funding for two Virginia boats, the Senate for only advanced components. The Navy’s 2021 funding request sacrificed one Virginia build in fiscal 2021 to add funding to the civilian nuclear-weapons programs managed by the National Nuclear Security Administration (NNSA).
The House has also lined the NNSA up for an $18 billion 2021 budget, which is $2 billion short of the request but over $1 billion more than the 2020 appropriation. Geveden said most of that increase would flow into the agency’s nuclear-weapon labs, increasing BWXT’s income from the equity stakes it has in the joint-venture contractors that manage those labs for the NNSA.
Geveden also said that an ongoing protest of DOE’s award of the Hanford Tank Closure Contract to the BWXT-led Hanford Works Restoration group means the transition to the new contractor will be delayed, probably beyond the horizon of the company’s near-term earnings.
Separately, Geveden said that BWXT is “likely” out of the common missile tube business for good, after eating the cost of repairs on a dozen tubes the company improperly welded in 2018. The tubes are intended for future Columbia-class ballistic-missile submarines, and BWXT should deliver the repaired hardware to Columbia prime General Dynamics Electric Boat “shortly,” Geveden said Tuesday morning.
Quarterly operating incoming in the Nuclear Operations Group, the flagship unit that includes the Navy business, rose around $10 million year over year to more than $85 million. Segment revenue rose more than $50 million to about $410 million. The segment cleared some $1.5 billion in backlog in the first six months of 2020, leaving it with just under $4 billion still in the pipeline. That does not include roughly $1 billion worth of unexercised options on an unspecified federal contract. BWXT expects the government to pick up the options.
The Nuclear Operations Group makes reactor components for naval warships and submarines, along with fuel for the reactors that power those vessels. The segment also purifies uranium that the Tennessee Valley Authority uses to produce tritium for U.S. nuclear weapons maintained by the NNSA.
The ongoing COVID-19 pandemic during the quarter whacked the Nuclear Power Group, which includes the company’s commercial nuclear-power and medical-isotope businesses. The unit’s second-quarter operating income plummeted almost $14 million to about $1 million. Segment revenue there dropped about $20 million to some $68 million. Backlog increased to more than $770 million from $730 million in the first half.
In the release, Geveden said the group “is well positioned for recovery through the remainder of the year.”
Quarterly operating income in the Nuclear Services Group, which includes operations at DOE defense-nuclear sites, more than doubled to just over $4 million, as revenue ticked up more than $3 million to around $33 million. Backlog remained at $43 million, but the figure does not include BWXT’s share of the joint venture companies that run DOE defense-nuclear sites under federal contracts.
