Babcock & Wilcox Enterprises, Inc. (NYSE: BW) provides fossil and renewable power generation and environmental equipment for the power and industrial markets worldwide.
On August 10, 2017, the company’s shares fell from $9.74/share to $2.87/share after the release of Q2 financial results that left investors disappointed.
Recent News:
In May 2017, the company announced that effective July 1, 2017, its Industrial Steam Generation group will transition from the Power segment to the Industrial segment. In addition, effective immediately, Leslie Kass has been named Senior Vice President, Industrial, to lead the segment.
After July 1, the Industrial segment will include the company’s B&W MEGTEC subsidiary based in DePere, Wis., its B&W SPIG subsidiary based in Arona, Italy, its B&W Universal subsidiary based in Stoughton, Wis., and the Industrial Steam Generation group, which will continue to be based in Barberton, Ohio.
B&W’s Industrial segment provides custom-engineered technologies for cooling, environmental, noise abatement and industrial steam generation applications, as well as related aftermarket services. With the addition of the Industrial Steam Generation group, which produced more than $100 million in revenue in 2016, the Industrial segment will be B&W’s second-largest, with annual revenue of approximately $550 million.
Further, in April 2017, B&W announced that its subsidiary, Babcock & Wilcox SPIG, Inc. (B&W SPIG), was awarded three major contracts totaling more than $60 million in the first quarter of 2017 to design and supply dry cooling systems for U.S. customers. Under the contracts, B&W SPIG will supply five low-noise air-cooled condensers and one air-cooled heat exchanger, also known as an air fin cooler, to customers in the United States.
Both of these types of B&W SPIG dry cooling systems features highly efficient, state-of-the-art designs that are custom engineered for high performance and reduced site construction costs. Dry cooling systems are typically used in process industries such as oil and gas, petrochemical, and chemical processing, and in electric power plants and waste-to-energy plants.
About Babcock & Wilcox:
The company is a Delaware Corporation, headquartered in Charlotte, North Carolina. B&W was founded in 1867 and has about 5,200 employees. The company operates in three segments (markets); Power, Renewable and Industrial.
The B&W Power segment offers boiler cleaning and material handling equipment; supercritical, subcritical, fluidized bed, chemical recovery, industrial power, package, and waste heat boilers, as well as heat recovery steam generators; and air pollution control products and related equipment, such as carbon dioxide capture and sequestration technologies, wet and dry flue gas desulfurization systems, catalytic and non-catalytic nitrogen oxides reduction systems, low nitrogen oxides burners and overfire air systems, fabric filter baghouses, wet and dry electrostatic precipitators, mercury control systems, and dry sorbent injection for acid gas mitigation. This segment also offers replacement parts, retrofit and upgrade projects, fuel switching and repowering projects, and training programs; and field technical, construction and maintenance, start-up and commissioning, and plant operations and maintenance services. The company’s Renewable segment provides steam-generating systems; environmental and auxiliary equipment for the waste-to-energy and biomass power generation industries; and plant operations and maintenance services. Its Industrial segment offers oxidizers, solvent and distillation systems, wet electrostatic precipitators, scrubbers, and heat recovery systems; specialized industrial process systems, coating lines, and equipment; and systems that control volatile organic compounds and air toxins, particulate, nitrogen oxides, and acid gas air emissions. This segment also provides air-cooled (dry) cooling systems, mechanical draft wet cooling towers, and natural draft wet cooling hyperbolic towers; and end-to-end aftermarket services, such as spare parts, upgrades/revamps for existing installations, and remote monitoring.
Product Mix:
Allen-Sherman-Hoff® ash and material handling
Babcock & Wilcox® steam generation and environmental systems
B&W MEGTEC industrial pollution control systems
B&W MEGTEC coating, drying and laminating technologies
B&W SPIG wet and dry cooling systems
B&W Universal noise abatement solutions
B&W Vølund renewable energy systems
Diamond Power® boiler cleaning equipment
Diamond Power® controls and diagnostics
KVB-Enertec™ emissions monitoring systems
Q2 Financial Review:
The company reported, Q2 revenues of $349.8 million, a decrease of $33.4 million, or 8.7%, compared to the second quarter of 2016. GAAP earnings per share in second quarter 2017 were a loss of $3.09 compared to a loss per share of $1.25 in second quarter 2016. Adjusted earnings per share were a loss of $2.56 for the three months ended June 30, 2017 compared to an adjusted loss per share of $0.18 in the prior year period. The Company’s cash and cash equivalents balance, net of restricted cash, was $67.9 million at June 30, 2017. The outstanding balances under revolving credit facilities totaled $131.4 million as of June 30, 2017.
The muted Q2 results prompted the company to revise its guidance for full year 2017 as follows:
- Power segment: full year 2017 revenue in the range of $825 million to $875 million with gross margin in the low 20% range
- Renewable segment: full year 2017 revenue of approximately $350 million with positive gross margins returning in second half 2017
- Industrial segment: full year 2017 revenue in the range of $400 million to $450 million with gross margin in the mid-teens
Stock influences and risk factors:
The company’s shares are currently trading at about 20% of book value;
Exposure to market risk from changes in interest rates relating primarily to cash equivalents and investment portfolio;
Has operations in many foreign locations, and, as a result, financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in those foreign markets;
Capital requirements are not being met through operations and additional borrowing or a capital raise may be required in the near term.
Stock chart:
Summary:
In intraday trading on August 24, 2017, BW shares are trading at $1.96 (+15.98%). BW shares have a daily average trading volume (90 day) of 1.42 million shares. The current RSI (14) is 12.70. The shares are trading well below their 50-day and 200-day moving averages of $8.98 and $12.16 respectively.
B&W shares have a 52-week price range of $1.61 – $17.72. Given the current price, long history of the company and the broad base of its products, and a book value of $9 – $11, these shares could be trading in a value range.
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