BWX Technologies Poised For Growth In Nuclear Power, Medical Radioisotopes Says Analyst

Seaport Global analyst Jeff Campbell on Tuesday initiated coverage on BWX Technologies Inc BWXT with a Buy rating and a price target of $145.

Campbell noted BWX Technologies’ multidecade U.S. Navy nuclear reactor franchise warrants a premium valuation based on the surety of revenues over time and its consistently strong gross margins. The company’s government division monopolizes U.S. Navy nuclear reactors and the fuel that drives them.

The company’s decades of good performance and a rising sense of global conflict persuaded Campbell this relationship would remain durable.

The analyst is also impressed with management’s ability to find value adds in ancillary products and services surrounding the core business.

Also Read: BWX Technologies Wins $2.1 Billion in U.S. Naval Contracts to Build Reactor Components for Submarines and Aircraft Carriers

In addition, Campbell noted commercial businesses in Canada add a growth component that suggests its EBITDA multiple will decline over time due to EBITDA growth.

The CANDU components and services are proving to be durable. The acquisition of Kinetrics promises to broaden the Canadian manufacturing capability. Ontario will likely put the first commercial SMR in the ground in 2028.

Although early, the BWRX-300 looks like a potential international franchise SMR with meaningful benefits to BWX Technologies.

BWXT Medical has consequential growth potential from regulatory approval of its Tc-99 platform and Ac-225, the latter depending on clinical trial results. Early indications are that alpha radiation can be a real game changer in cancer treatment as its damage proves too much for even cancers’ many repair mechanisms to overcome.

The growth potential in its commercial division in power applications and medical radioisotopes shows that “it is not a one-trick pony,” says analyst.

It has comprehensive manufacturing capabilities related to nuclear radiation.

In the U.S., it constructs the primary systems for naval nuclear propulsion systems. These units have specific strictures that onshore nuclear facilities do not have to tackle.

Warship nuclear reactors must accommodate battle shock, noise limits, crew proximity to the reactor and frequent, rapid changes in reactor power. They must use highly enriched uranium (HEU) fuel to reduce or eliminate the need for refueling. This increases the corrosion potential within reactors expected to operate for decades without refueling.

BWX Technologies is the only private entity in the U.S. licensed to make the HEU that its reactors require and maintains the scale to fuel the US Navy nuclear fleet. Its skillful HEU manufacture, storage, and handling reduce corrosive potential.

BWX Technologies’ combination of component and fuel capabilities gives it an unassailable monopoly over U.S. Navy nuclear propulsion systems now and in the future.

It has also designed and is constructing a mobile reactor system for the DoD (Project Pele), which is currently in late-stage development.

BWX Technologies’ expertise in small reactors makes it a natural manufacturing candidate for the evolving Small Modular Reactor (SMR) landscape.

BWX Technologies goes big in Canada, building components for large-scale nuclear power generation facilities. It maintains the only heavy component manufacturing facility in NAM.

Its Canadian work is wed to the CANDU heavy water reactor approach. Canada is at the vanguard of maintaining and growing its nuclear fleet. BWX Technologies is essential in providing the components necessary to support this effort.

Like the U.S., BWX Technologies Canada manufactures fuel for CANDU reactors and supports the complete operating requirements of these systems.

The CANDU reactors also support BWX Technologies’ development of radioisotopes with neutron bombardment.

It utilizes Canada’s TRIUMF cyclotron for proton bombardment. Radionuclides are in high demand and strained supply in both diagnostic and therapeutic applications.

It is a fragmented, high-margin, high-growth industry ripe for further consolidation over time.

Campbell projected first-quarter revenue of $602.1 million and adjusted EPS of $0.60.

BWXT Price Action: BWX Technologies stock is up 0.75% at $99.38 at publication Tuesday.

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