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BWXT · Analyze

WATCH Industrials

0. Snapshot

Item Value
Price (2026-08-27) $155.85
52-week range $147.74 – $241.82 (price is 35.6% below its all-time high)
Market cap $14.28B
Sector / Industry Industrials / Aerospace & Defense
Segments Government Operations (naval nuclear), Commercial Operations (power, medical, isotopes)
Dividend yield 0.69% (payout ratio 27%)
Analyst consensus Buy (mean 1.81), target range $190-290, mean $234

1. Knowledge-base check

python .mcp/kb.py find BWXT returns one hit: Knowledge/Themes/nuclear-uranium.md (swept 2026-06-10, refreshed 2026-07-31). That sweep's finding is layer-specific: BWXT sits mostly in the Generation-adjacent manufacturing layer — it does not carry commodity price risk (uranium spot) or binary-permit risk (a pre-production miner); its dominant risk is contract/backlog and government-budget risk. No prior /analyze report exists for BWXT — this is the first full file. Watchlist.md already carries the name (unscored [—], sleeve "AI capex — sellers into the buildout" and "Nuclear / uranium") with a thesis line: "Sole-source US Navy nuclear propulsion + BWRX-300 SMR. 32.7x fwd, tgt $238 (+40%)."

2. General Health (Fundamentals)

Income statement, TTM reconciled from four quarters (Q3 2025 – Q2 2026)

Q3'25 Q4'25 Q1'26 Q2'26 TTM sum Vendor TTM field
Revenue 866.29M 885.84M 860.22M 901.63M 3,513.97M 3,513.97M ✓
Net income 82.11M 92.99M 91.07M 89.01M 355.18M 355.18M ✓
Operating income 92.13M 72.94M 85.25M 89.71M 340.03M (GAAP-reported "Op Income") — 426.23M on Yahoo's "Total Operating Income As Reported" line both used below

TTM diluted EPS = $355.18M ÷ 91.86M shares ≈ $3.87, matching the vendor's trailingEps $3.86 to the cent. No single-quarter-read-as-TTM trap here — the reconciliation holds.

The forward-multiple trap fired (as flagged)

Yahoo's snapshot shows forwardPE 29.66x on forwardEps $5.25. Its own epsCurrentYear / priceEpsCurrentYear fields, read alongside it, show $4.74 and 32.89x — a materially different number. nextFiscalYearEnd reads 2026-12-31, i.e. the fiscal year still in progress, which is the year epsCurrentYear describes. forwardEps ($5.25) is FY2027, one year further out than most readers assume "forward" means. The true current-year (FY2026) forward multiple is 32.9x, not 29.7x — a 3.2-point understatement that would flatter any screen or peer table built on the raw field. See [[pitfall-vendor-forward-eps-is-the-wrong-fiscal-year]]; this makes BWXT roughly the 25th name to fire it this month.

A second data trap: the snapshot free-cash-flow field understates TTM FCF

Reconciled two independent ways from quarterly_cashflow (Q3'25 – Q2'26):

Quarter OCF Capex Quarter's own FCF cell
Q3 2025 143.16M -48.27M 94.89M
Q4 2025 126.995M -70.19M 56.80M
Q1 2026 92.60M -42.51M 50.09M
Q2 2026 156.40M -41.43M 114.97M
TTM sum 519.16M -202.40M 316.76M

OCF − Capex = $316.76M. The sum of each quarter's own "Free Cash Flow" cell = $316.76M. Both methods agree to the dollar. get_stock_info's operatingCashflow field (519,158,016) ties to this table exactly. But its freeCashflow field returns $145,624,256 — 54% below the reconciled $316.76M. This is a second instance of [[pitfall-yahoo-snapshot-fcf-field-diverges-from-quarter-sum]] (previously seen once, on DPZ, at a 19% miss) — worth flagging to the orchestrator as upgrading that pitfall's confidence from medium toward high. Every FCF figure in this report uses the reconciled quarter-sum, never the snapshot field.

FCF and capital allocation

Metric FY2022 FY2023 FY2024 FY2025 TTM (Q3'25-Q2'26)
OCF 244.70M 363.70M 408.43M 479.85M 519.16M
Capex -198.31M -151.29M -153.65M -184.56M -202.40M
FCF 46.39M 212.41M 254.78M 295.29M 316.76M
FCF/share 0.51 2.32 2.78 3.21 3.46

FCF has grown every year since the FY2022 trough (which itself was a heavy-capex year, not a weak-earnings year — 3yr FCF "CAGR" of 85% in fin.py's output is an artifact of that low base and should not be read as a repeatable growth rate). The trend is real and improving: FCF has roughly doubled since 2023 on a genuinely broadening revenue base, and 2026 company guidance (raised at the August print) points to $345-360M full-year FCF, ahead of the TTM figure above.

Capital allocation over FY2025: acquisitions dominate (-$564.82M, funded mostly by new debt issuance of $2.28B against $1.29B repaid), dividends $92.47M (steady ~8%/yr growth), buybacks a token $30M (roughly offsetting share-based dilution, not a real repurchase program — diluted share count has been flat, +0.1% CAGR over 3yr). This is a name reinvesting essentially all free cash into M&A and organic capex, not returning it to shareholders — appropriate for a franchise with funded backlog growth, but it means the balance sheet, not the buyback line, is the thing to watch.

Leverage — the one area of genuine change

FY2022 FY2023 FY2024 FY2025 (Dec) Q2 2026 (latest)
Total debt 1.29B 1.21B 1.06B 2.02B 2.02B
Total assets 2.62B 2.75B 2.87B 4.27B 4.42B
Debt/Assets 49.2% 44.0% 36.9% 47.2% 45.7%
Debt/Equity — — — 151.4 (Yahoo) similar
Interest coverage (OpInc/IntExp, TTM) — — — — ~12.4x (426.23M / 34.49M)

Debt/Assets stepped up ~10 points in FY2025 (Kinectrics stable-isotope acquisition, mid-2025) and has stayed there through the Precision Components Group (PCG) close in July 2026 — a second debt-funded acquisition that will show up fully in the Q3 2026 balance sheet, not yet in the data above. Liquidity is not a concern (current ratio 2.40, quick ratio 2.26, cash $608M) and interest coverage is comfortable at ~12x, but this is a company that has roughly doubled its debt load in 18 months to fund M&A, and a third such deal would be worth underwriting on its own merits rather than assuming the pattern is free.

Per-share and growth

  • Revenue/share: $34.82 (FY2025) → $38.35 TTM (Yahoo)
  • Revenue CAGR: 12.7% (3yr, FY2022-25); TTM revenue growth 18% YoY, accelerating on the back of the PCG and Kinectrics deals plus organic naval/commercial demand
  • Net income CAGR: 11.4% (3yr)
  • Shares outstanding: essentially flat (91.2-91.6M throughout — no meaningful dilution or buyback-driven shrinkage)

Scorecard: health is genuinely improving — revenue, FCF, and backlog are all growing faster than the 3yr CAGRs suggest, per the record Q2 2026 print (see §5). The one flag is leverage, which has grown faster than earnings over the same window.

3. Moat & Competitive Advantage

The core: as close to a monopoly as a modern industrial company gets

BWXT's Government Operations segment is the sole-source, security-cleared manufacturer of naval nuclear reactor components for US submarines and aircraft carriers — a franchise that does not compete on price, cannot be replicated by a new entrant without decades of Naval Reactors qualification, and is funded by multi-year, cost-plus or fixed-price-incentive Department of Defense contracts. This is a structural, not cyclical, monopoly — the switching cost for the US Navy is not "expensive," it is "does not exist as an option." Q2 2026 disclosed $8.4B backlog (+40% YoY) and a trailing-12-month book-to-bill of 1.7x, both concentrated in this segment plus the newly closed PCG acquisition, whose revenue and backlog are majority naval-nuclear.

The optionality leg, and a change worth updating the thesis for

The Commercial Operations segment (power components, fuel handling, field services, and — until now — medical isotopes) is the "natural SMR replacement" leg the Watchlist thesis names. Q1 2026 commercial revenue grew 121% YoY to $283.6M on a $1.72B commercial backlog, driven by demand tied to the BWRX-300 (BWXT holds an engineering contract on the reactor pressure vessel for Ontario Power Generation's Darlington project) and the broader AI-datacenter power-demand narrative pulling capital into nuclear generally.

In August 2026, BWXT agreed to sell its medical business (BWXT Medical plus Kinectrics' stable isotopes) to Nordic Capital for up to $800M. This removes one of the two legs of the original "SMR + medical isotope optionality" thesis. Read charitably, it is a rational simplification — BWXT collects a premium price for a business it had only recently built out (the Kinectrics deal that grew Debt/Assets in the first place), retires debt or funds further core/SMR capex with the proceeds, and narrows focus to the highest-return part of the commercial book. Read skeptically, it shrinks the "optionality" argument to SMR components alone. The Watchlist thesis line should be updated to reflect this (see write-back below) — "BWRX-300 SMR" stays, "medical isotope" optionality should be dropped or reframed as "monetized, not abandoned."

Adversarial stress-test

"You are a well-funded rival — how easily do you enter?" On the naval side: essentially not at all inside a normal investment horizon. Naval Reactors qualification, security clearances, and specialized tooling represent a multi-decade moat that no amount of capital shortcuts. On the commercial/SMR side, the picture is different — GE Vernova Hitachi, Westinghouse, TerraPower, and a wave of SMR entrants (OKLO, NuScale) are all competing for the same demand wave, and BWXT's commercial role there is as a components/engineering supplier, not the reactor OEM — a real but narrower moat than the naval franchise.

Quantitative check: ROIC and gross margin softened, likely on M&A deployment lag

FY2022 FY2023 FY2024 FY2025
Gross margin 24.7% 24.8% 24.3% 22.9%
ROIC (NOPAT/InvCapital, FY-end) ~12.1% ~12.5% ~12.3% ~8.0%

Both figures softened in FY2025. The invested-capital base jumped from the Kinectrics deal (closed mid-2025, added to the balance sheet before its earnings ramped), which mechanically depresses a point-in-time ROIC read — recomputing on a TTM basis using average invested capital (Q2'25 to Q2'26) brings ROIC back to ~11%, closer to the historical band, consistent with a deployment-lag rather than a structural moat problem. Gross margin compression (24.8% → 22.9% → 22.1% TTM) is the more durable-looking signal — newly integrated, lower-margin acquired businesses are diluting the historical mix, and this should be watched at the next print rather than dismissed. Neither figure yet says the moat is eroding — the sole-source naval franchise is untouched — but both say the M&A-funded growth strategy is not free, and the market should not pay full ROIC-multiple credit until the acquired businesses prove out at BWXT's historical returns.

Evergreen assessment

The naval nuclear core is about as close to a forever business as exists in industrials — driven by a multi-decade US strategic commitment to a nuclear submarine and carrier fleet, not by a product cycle. The commercial/SMR layer is a genuine multi-decade growth call on a nuclear-power renaissance that is not yet proven at scale (no BWRX-300 is operating commercially today), so it is priced, correctly, as growth optionality rather than annuity cash flow.

4. Sentiment & Intelligence

  • Q2 2026 (reported 2026-08-10): revenue $901.6M (+18% YoY, +9% organic), adjusted EPS $1.70 (+5% YoY), adjusted EBITDA $156M (+7% YoY) — a beat, but shares fell after hours, then the stock continued lower through late August.
  • Guidance raised across the board: FY2026 revenue ~$3.8B (high-teens growth), adjusted EBITDA raised to $662-672M, FCF guidance raised to $345-360M from $315-330M. This is a guide-up, not a guide-down — the post-earnings weakness does not track the fundamentals as disclosed.
  • Analyst repricing has been two-sided but net positive on target, negative on rating momentum: JP Morgan initiated Overweight $230 (7/27); Seaport upgraded to Buy $245 (6/18); Deutsche Bank upgraded to Buy $255 (5/15); BofA raised to $250 (3/25). Against that, Truist trimmed its target to $202 (still Hold, 8/14) and Wells Fargo initiated Underweight at $200 (4/1) — the most bearish institutional view on the stock still implies ~28% upside from the current $155.85. Consensus mean is $234 (14 analysts, average rating Buy).
  • Sector-wide, not company-specific, selloff around Aug 20-21: Mercury Systems, BWXT, Kratos, Parsons, and Huntington Ingalls all fell together (BWXT -3.8%, Kratos -7.6%, HII -3.4%). No BWXT-specific trigger was found in the search — this reads as a defense-sector derating (budget or shutdown-risk driven, per general defense-sector commentary that week) rather than a signal about BWXT's own business. Worth monitoring whether it is the start of a genuine multiple reset or a one-week overreaction.
  • Insider activity: CEO Rex Geveden has sold in recurring ~$2M tranches roughly every 1-3 months through 2025-2026 (most recently 10,000 shares at $171-174 on 8/12) — pattern and size are consistent with a pre-set 10b5-1 trading plan, not a fresh signal. No insider buying observed in the transaction history pulled. Not a red flag at this cadence, but not a golden flag either.
  • New contracts: $1.4B in naval nuclear propulsion program contracts announced in May 2026, reinforcing the backlog figures above.

5. Valuation

Applied conditionally — BWXT is a modest dividend payer (0.69% yield, 27% payout) inside a growth-industrial profile, so Graham and DYT get low weight; the forward-earnings/FCF view and peer/analyst cross-check carry the real weight.

Model Output Weight Note
Graham IV √(22.5×EPS×BVPS) $35.57 vs $155.85 price Very low Designed for stable, asset-heavy value names; irrelevant for a growth-industrial trading on backlog momentum, not book value
DYT Current yield 0.69% vs 5yr avg 1.13% Low, cautionary Yield has compressed — price has run ahead of the dividend — a mild "expensive vs. own history" signal, but yield is not the thesis here
DDM Not meaningful N/A Payout too low/immature for a dividend-discount read
Bogle expected return 0.69% yield + ~12% EPS CAGR ± multiple reversion Moderate If the multiple holds, ~12-13%/yr; if it reverts from 40x ttm toward a 30-32x historical band, mid-single-digit to flat over 1-2yr
Forward-earnings cross-check True FY2026 (current-year) multiple 32.9x on $4.74 EPS (corrected per §2); TTM multiple 40.4x on $3.86 High The cleanest read given the fiscal-year trap; both are rich in isolation but sit inside the range the stock has traded at through its 2024-2026 re-rating

Fair value derivation: Because the forward-year field is unreliable (per the fired pitfall), this valuation is anchored on the unambiguous TTM EPS of $3.86, per the pitfall's own prescribed remedy of setting the multiple on ttm rather than fwd when the two disagree. Over 2024-2026 the stock's own TTM multiple has ranged from ~37x (support, mid-2024) to over 60x (euphoric peak, Jan 2026 near the $241.82 ATH) — a wide band reflecting a genuine nuclear-demand re-rating, not stable historical valuation. A 34-46x ttm band (below the recent euphoric peak, above the 2024 floor, and consistent with a name carrying record backlog and raised guidance but also rising leverage and a softened margin) gives:

Fair value: $145-195 (34x-46x ttm EPS of $3.86, rounded)

The current price ($155.85, ~40.4x ttm) sits in the lower-middle of that range — not a bargain, not obviously expensive, and meaningfully below both the analyst consensus mean ($234) and even the single bearish target ($200). Entry at 36-39x ttm ($135-150, near the current 52-week low of $147.74) would represent a better margin of safety, especially if the sector-wide selloff extends. Trim at 48x ttm (~$185) sits below consensus mean and below the name's own euphoric-peak multiple, reflecting a conservative bias given the leverage and margin caveats above.

6. Synthesis & Verdict

Two questions, per the framework:

  1. Is this a good business? Yes, with a caveat. The naval nuclear core is one of the strongest moats available in the public defense-industrial universe — sole-source, multi-decade, government-funded, immune to the usual competitive-entry stress test. The commercial/SMR layer is real, growing fast (backlog +40% YoY, book-to-bill 1.7x), and genuinely levered to a structural nuclear-power tailwind. The caveat: two debt-funded acquisitions in 18 months have grown Debt/Assets from ~37% to ~46% and diluted ROIC and gross margin, and the newly announced medical-business sale narrows (not kills) the optionality leg of the original thesis.
  2. Has the market priced that in? Largely, yes. At 40.4x TTM / a corrected 32.9x current-year earnings, the stock already carries a premium industrial multiple, even after a 35.6% pullback from its all-time high. The pullback looks sector-wide rather than BWXT-specific (Mercury, Kratos, Parsons, HII all fell together the same week with no distinguishing BWXT news), and guidance was raised, not cut, at the last print — so the case for "market overreacted" has real support, but the stock is not yet cheap enough to say the market handed back the whole re-rating.

Verdict: WATCH, conviction 6.5. A genuinely improving, moat-protected business trading at a fair-but-not-cheap price, with real near-term catalysts (Q3 print 11/2, the medical-sale close, possible further naval contract awards) that could open a better entry. Not a sell — the franchise quality and raised guidance argue against chasing weakness lower with a trim — but not yet the entry point the fair-value work supports either.

Key risks: - Leverage trajectory — a third debt-funded acquisition, or integration stumbles on PCG, would extend the Debt/Assets climb past the comfortable-but-rising ~46% level. - Multiple compression risk — the stock re-rated from ~20-25x to 40x+ TTM earnings over 2024-2026 on a nuclear-demand narrative; any stall in that narrative (SMR permitting delays, defense-budget friction, a genuine sector-wide derating rather than a one-week move) could compress the multiple faster than earnings can grow into it. - Margin/ROIC dilution from M&A — not yet a moat problem, but worth confirming at Q3 that gross margin stabilizes rather than continuing to compress.

Data traps hit this session

  1. [[pitfall-vendor-forward-eps-is-the-wrong-fiscal-year]] — fired. forwardPE 29.66x prices FY2027 EPS ($5.25); the true current-year (FY2026) multiple is 32.89x on epsCurrentYear $4.74. Valuation in this report is set on TTM to route around the ambiguity entirely, per the pitfall's own prescribed remedy.
  2. [[pitfall-yahoo-snapshot-fcf-field-diverges-from-quarter-sum]] — fired, second known instance (previously DPZ only, medium confidence). BWXT's snapshot freeCashflow field ($145.6M) understates the reconciled TTM figure ($316.8M, confirmed two independent ways) by 54% — a larger miss than the 19% seen on DPZ. Worth surfacing to the note as a confidence upgrade candidate.

Sources