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    BWX Technologies Inc (BWXT)

    Q4 2023 Earnings Summary

    Reported on Feb 13, 2025 (After Market Close)
    Pre-Earnings Price$89.28Last close (Feb 27, 2024)
    Post-Earnings Price$93.31Open (Feb 28, 2024)
    Price Change
    $4.03(+4.51%)

    What went well

    • BWXT Medical is experiencing strong growth across all product lines, especially in actinium isotopes, where BWXT is the only commercial supplier in the market today. The medical segment has reached positive EBITDA, and growth in 2024 is expected to be significant even without any meaningful contribution from Tech-99, which remains on track for commercialization.
    • BWXT's Government Operations segment is benefiting from strong growth drivers outside the core naval business, including the ramp-up of the DRACO space microreactor program and expansion in special materials programs. The company has achieved a 10% net workforce growth, positioning it to grow the top line nicely in 2024 across all business lines.
    • BWXT anticipates backlog contributions in 2024 from the Pickering nuclear reactor life extension project in Ontario, where they will supply 48 steam generators for units 5 through 8. This project adds to their commercial operations growth and supports long-term visibility into their existing backlog.

    What went wrong

    • BWXT's margins are under pressure due to a mix shift towards cost-reimbursable programs, such as microreactor projects and new special materials programs, which have lower margins and contributed to a modest year-over-year margin decline in government operations.
    • Labor inefficiencies related to rapid workforce expansion are impacting operational efficiency and margins, as the company continues to experience labor inefficiencies from rapid 10% workforce growth.
    • Potential funding breaks in DOE site cleanup work could negatively impact BWXT's business, as funding breaks can lead to standdown modes and have happened in the past, affecting this area of operations.

    Q&A Summary

    1. Medical Isotope Growth
      Q: Which isotopes are driving medical growth?
      A: BWXT's medical growth is driven by strong performance across all product lines, especially germanium and strontium, which are growing very strongly. BWXT is the only commercial supplier of actinium, which has been a good product for them. Additionally, TheraSphere, a product manufactured for Boston Scientific, is compounding at a 10% rate.

    2. Tech-99 Approval Timeline
      Q: Any updates on Tech-99 approval timeline?
      A: BWXT expects approval for Tech-99 in 2024 and remains on track with no changes.

    3. Actinium Market Potential
      Q: Could actinium be larger than Tech-99?
      A: While actinium is a fast-growing product with meaningful revenue expected in 2024 , BWXT still has high hopes for Tech-99. The actinium and lutetium lines are small now but could explode meaningfully as Phase III trials succeed, particularly in 2026-2027, leading to significant scale-up.

    4. Government Revenue Growth
      Q: What's driving government revenue growth in 2024?
      A: Growth is driven by ramping up the DRACO space microreactor program , expansion in special materials including new metal and HALEU processing , and strong performance in the core NOG business due to a 10% net workforce increase.

    5. Navy CapEx Reimbursement
      Q: Are you discussing CapEx reimbursement with the Navy?
      A: BWXT has proactively addressed capital needs ahead of the Navy shipyards, investing during prior capital campaigns. Future discussions on capital load with customers will occur as new scopes arise, but BWXT is well-equipped to handle upcoming volumes.

    6. Budgetary Risks
      Q: Any risks from the budget environment or CRs?
      A: BWXT's business is largely insulated from budgetary issues since most programs are programs of record with multiyear funding. The only potential impact is on DOE site cleanup work, which might face funding breaks, but overall, the business is well protected.

    7. Missile Tube Recovery
      Q: How large was the missile tube recovery in Q4?
      A: While specifics are sensitive, BWXT successfully recovered the amount from 2022 and then some, including an $11 million recovery from the second quarter of 2022. This contributed meaningfully to the EAC adjustments.

    8. Pickering Backlog
      Q: Will Pickering units 5-8 add backlog this year?
      A: BWXT expects a modest amount of backlog from Pickering units 5-8 in 2024, with ramp-up beginning this year. They anticipate making 48 steam generators for these reactors.

    9. Guidance Wildcards
      Q: What wildcards could impact this year's guidance?
      A: There are not many wildcards; the business is predictable. BWXT included some probability-adjusted contributions from Hanford, but it's not meaningful. They are not relying on Tech-99 contributions to meet forecasts.

    10. Medical Segment Depreciation
      Q: Will depreciation costs impact medical profits without Tech-99?
      A: Depreciation will phase in with asset deployment tied to commercial activity. Without Tech-99 commercialization yet, depreciation isn't turned on, so it doesn't meaningfully impact EPS targets.

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