BWX Technologies expects to share in high-dollar contracts at the Energy Department’s Hanford Site in Washington state, but is tempering its 2019 earnings outlook due to the slower-than-expected pace of awards.
The company is lowering its full-year operating income guidance for the Nuclear Services Group, which includes BWXT’s work for the DOE nuclear cleanup office that oversees Hanford, from roughly $25 million to $20 million.
BWXT is vying for a share of two high-dollar awards at the nuclear cleanup site: the Hanford Tank Closure Contract and the Central Plateau Cleanup Contract, President and CEO Rex Geveden said Tuesday during the company’s second quarter earnings call.
“We believe that one of the DOE Hanford awards is moving to the right, pushing an anticipated award and associated income from the contract into 2020,” BWXT Senior Vice President and Chief Financial Officer David Black said during the call.
Neither Black nor Geveden specified what contract award is slipping. But during their own earnings calls this week, senior executives at AECOM and Jacobs Engineering suggested it is the potential 10-year Hanford Tank Closure Contract that could be worth between $10 billion and $15 billion.
Earlier this year, an industry source said a Fluor-BWXT team was competing with two other ventures – an Atkins-AECOM partnership, along with a Jacobs-Honeywell team possibly featuring Perma-Fix Environmental Services – for the tank contract. AECOM and Atkins are the parent companies to current contractor Washington River Protection Solutions, which is set to stay on the job at least through Sept. 30.
The contract involves retrieval and treatment of 56 million gallons of radioactive and contaminated liquid waste located inside 177 underground storage tanks at Hanford. The new contract will shift emphasis from operation to closure of the tanks.
The last public projection from DOE in May suggested the tank contract could be issued by the end of this month.
That was also the projected schedule for the Central Plateau Cleanup Contract at Hanford, which covers demolition of facilities and remediation of highly radioactive areas, including old reactor buildings, near the Columbia River. That award would also last up to 10 years and be worth $7 billion to $12 billion.
“One of those likely be awarded this year and the other one likely into next year, and we’re competing on both of those,” Geveden said.
The company’s Nuclear Services Group is the silo that covers work for the Energy Department’s Office of Environmental Management. It also includes work for operating nuclear power plants.
Another thing putting a ceiling on 2019 performance in Nuclear Services was the decision by power company Exelon to close the remaining Three Mile Island nuclear power reactor in Pennsylvania by the end of September. The company previously said it might keep the unit open if state lawmakers passed legislation to support nuclear power, but that did not happen during the state’s legislative session this year.
BWXT would have performed inspection services during the next refueling and maintenance outage if the Exelon reactor stayed open, officials noted. The closure, however, means there will be no outage.
Revenue Rises During Quarter
BWX Technologies posted $471 million in revenue for the second quarter of 2019, 7.4% better than the $439 million recorded for the same period in 2018.
Net income dropped slightly to $58.9 million, or $0.62 per diluted share, from $60.7 million, or $0.60 per diluted share, a year earlier. On a non-generally accepted accounting principles basis, net income stepped up from $58 million, or $0.58 per diluted share, in second-quarter 2018 to $59.1 million, or $0.62 per diluted share, in the latest earnings period.
Revenue for BWXT’s Nuclear Operations Group, which includes the Navy nuclear business and uranium downblending for the Energy Department’s semiautonomous National Nuclear Security Administration (NNSA), jumped 7.9% to $358.4 million. That compares to $332.1 million for the quarter ended June 30, 2018. The increase was due in part to an increase in unspecified production volume and more long-lead material purchases, the Lynchburg, Va.-based company said in its earnings release.
Likewise, the Nuclear Power Group’s revenue made a big jump, 14.5%, to $86.6 million for the most recent quarter from year-ago sales of $75.7 million. The change was due in part to refurbishing components for the nuclear power industry and the 2018 acquisition of Sotera Health’s Nordion medical radioisotopes business.
The Nuclear Services Group reported revenue of $29.8 million, down 8.6% from roughly $32.6 million in the second quarter of 2018. Contract completions was one factor that offset improved site performance.
The company reiterated its earlier guidance of $2.50 earnings per share for 2019.
“Our strong second quarter results demonstrate the resiliency of our business,” Geveden said in the earnings press release.
