Not yet a year removed from spinning off its power-generation business, 2015 income from continuing operations at the now-nuclear-focused BWX Technologies rose nearly 9 percent year over year in 2015, despite a profit drain associated with the loss of two big contracts in the DOE nuclear enterprise in 2014.
Analysts were upbeat about the news, with a group of three from Bank of America, KeyBanc Capital Markets, and William Blair this week providing a consensus rating of “strong buy” on BWXT’s common shares, according to data aggregated by Zacks Investment Research and posted online by the Nasdaq exchange.
Excluding costs related to the spinoff and major pension expenses, the Lynchburg, Va.-based contractor on Wednesday reported adjusted earnings per share of $1.42 for 2015, up 7.6 percent from $1.32 a share in 2014. Revenue dipped $35 million to some $1.41 billion for the year. In 2014, revenue was inflated by a change order to contracts booked that year in the company’s Nuclear Operations segment, which supplies equipment for the U.S. Navy via the Department of Energy’s National Nuclear Security Administration (NNSA).
BWXT has a virtual monopoly in this line of business, and has for nearly 70 years. In 2015, the Nuclear Operations segment’s operating income fell about $13 million year over year to roughly $250 million. Revenue in 2015 declined about $40 million year over year to about $1.18 billion, mostly owing to the contract change order.
Elsewhere in the portfolio, the loss of the company’s Pantex and Y-12 contracts with the NNSA in 2014 continued to sting the Technical Services segment, which in partnerships with other major DOE contractors manages operations of active U.S. government facilities and cleanup of legacy waste across the DOE weapons complex.
Operating income in the Technical Services segment fell about to about $18 million in 2015, a $17 million year-over-year drop. Losing contracts to manage the Y-12 nuclear weapons-component manufacturing facility in Tennessee and the department’s Pantex weapons assembly-and-disassembly facility near Amarillo, Texas, cost the company some $26 million in 2015. Centrus Energy Corp’s government-mandated closure of the American Centrifuge Project in Ohio, for which BWXT was an equipment provider, cost Technical Services roughly another $4 million in the year just ended. These losses were partially offset elsewhere in the segment “by improved fee performance at several of our other sites as well as favorable billing rate adjustments” compared with 2014, according to the company’s latest 10-K filing with the Securities and Exchange Commission
Technical Services revenue fell only about $100 million in 2015 to $83.8 million, BWXT said.
Meanwhile, the commercially focused Nuclear Energy segment rebounded from a $23 million loss in 2014 to post a roughly $1.7 million operating profit in 2015. Segment revenue was about flat at roughly $155 million, BWXT reported. The 2014 operating loss was mostly due to a roughly $16 million charge related to a lost lawsuit involving commercial nuclear power contracts.
Including pretax charges, losses related the discontinued operations at the power generation business, and the spinoff of the power generation business, BWXT’s net income for 2015 rose to roughly $130 million, or $1.23 a share, compared with just under $30 million, or 27 cents a share, in 2014.
The dramatically lower 2014 earnings were due in part to a pension-related expense totaling more than $140 million, and an operating loss in the Nuclear Energy segment. Conversely, 2015 earnings benefited from lower pension expenses and nearly $95 million of income related to a favorable court judgment; BWXT sought, and received, reimbursement from American Nuclear Insurers of money it paid to settle litigation from the 1990s brought by workers who said they were exposed to radiation on the job at a commercial nuclear plant.
