BWX Technologies brought in $542 million in first-quarter 2020 revenue, 30% more than the $416 million generated during the first three months of 2019.
Net income for the period ended March 31 amounted to $75.5 million, $0.79 per diluted share, a significant year-over-year jump from $49 million, $0.51 per diluted share, the Lynchburg, Va.-based company reported this week.
BWXT’s flagship Nuclear Operations Group, which includes productoin of reactors and reactor components that power Navy ballistic-missile and attack submarines, plus manufacturing fuel for those and other U.S. naval warships, recorded $424 million in revenue for the first quarter: a 39% increase from $305 million in the prior-year period. The group’s operating income was $90.4 million, 57% more than the $57.6 million a year ago, thanks in part to higher production volume of components for the Navy’s Columbia-class submarine.
“We had a remarkably strong first quarter 2020 with record revenues and earnings led by growth in our naval nuclear manufacturing business,” BWXT President and CEO Rex Geveden said in the release.
Shortly before the company filed its earnings report, BWXT confirmed than an undisclosed number of workers at its Nuclear Fuel Services subsidiary in Erwin, Tenn., had tested positive for COVID-19. The facility makes nuclear naval fuel, and is central to the company’s contract to downblend uranium for the National Nuclear Security Administration’s (NNSA) production of tritium that boosts the explosive power of nuclear weapons. Nuclear Fuel Services also looks like a lock to take home a contract to purify highly enriched uranium metal, used in nuclear weapons, for the NNSA later this decade.
Financially, however, the viral disease that hit U.S. shores from China in January has not taken too much of a bite out of BWXT’s core defense business, Geveden said during a conference call with investors this week.
On the call, Geveden said he saw growing bipartisan support in Congress for funding a second Virginia-class attack submarine in fiscal 2021. The Department of Defense, in its annual budget request, sought funding for one rather than two vessels in the fiscal year that starts Oct. 1, citing the White House’s desire to give the NNSA a 20% budget increase to about $20 billion. That’s billions more than the agency projected last year it would seek in fiscal 2021, and the Navy could be the bill payer.
“The House and Senate Armed Services committees are slated to provide their markups to the president’s budget request in the coming months, and we are seeing incremental bipartisan support for a second Virginia-class submarine in the FY ’21 budget discussions,” Geveden told investors and analysts.
The CEO said the company still anticipates, and is planning for, its next multiyear pricing agreement with the Navy to cover two years, fiscal 2021 and 2022, and to include components for four Virginia-class submarines and a Columbia-class ballistic missile submarine.
“We may see a scenario where the second Virginia-class submarine hull is not ordered but the nuclear propulsion equipment for a second submarine is still ordered with advanced procurement funding. This would enable the government to keep shop hours balanced and take advantage of cost efficiencies through optimized production volume for these key systems that BWXT provides for the Navy’s nuclear fleet,” he added.
Meanwhile, the Nuclear Services Group, which houses BWXT’s management contracts for Department of Energy defense-nuclear sites, recorded revenue of $37 million. That rose from $29 million in the first quarter of 2019. The group’s quarterly operating income rose dramatically to $6.4 million in 2020 from $1.6 million in 2019, thanks to the increased volume in U.S. commercial nuclear service work.
Even so, COVID-19 did nip BWXT’s commercial business a little in the quarter, but not enough for management to tamp down its earnings guidance yet. The company is sticking with its guidance of $2.80 a share for now, Geveden said. The CEO added that he did not anticipate an extensive pandemic effect on the company’s operations beyond the second quarter of 2020.
Revenue in the Nuclear Power Group was $88 million, up slightly from $84 million a year earlier. The group’s operating income was $8.5 million, a 33% dip from $12.6 million following conclusion of a design and component manufacturing contract for a steam generator project in China.
Staff from Nuclear Security & Deterrence Monitor affiliate publication Defense Daily contributed to this report.
