Thorium, a slightly radioactive, silvery metal, is found abundantly in nature: three to four times more than uranium. Despite its abundance, thorium has seen limited use in industry or power generation because it isn't directly a nuclear fuel. However, its potential to create fissile material makes it a promising candidate for long-term energy solutions.
Upon recognizing this potential, China has been quietly working on developing a molten salt nuclear power plant fueled by thorium. The project has been in the works for years, with a prototype reactor unveiled in 2021. Now, China aims to bring the world’s first thorium-fueled molten salt reactor online by 2025 in the Gobi Desert, promising a safer and greener alternative to traditional nuclear power. Experts estimate that China’s thorium reserves could power the nation for 20,000 years.
By 2029, China plans to make the Gobi Desert reactor fully operational, generating 60 megawatts of power, with commercial reactors potentially following by 2030. Moreover, the country aims to have 150 advanced reactors in operation by 2035, far outpacing the United States, which currently has 93 reactors. According to a study by the Information Technology & Innovation Foundation, the U.S. could lag China by up to 15 years in developing advanced nuclear technologies.
The global energy landscape is shifting as China races to establish itself as a leader in next-generation nuclear technology. One company well-positioned to benefit from this nuclear revolution is BWX Technologies, Inc. (BWXT).
With a history dating back to the 1850s and a legacy of innovation in the nuclear industry, BWXT is well-positioned to capitalize on the growing interest in thorium reactors. In 2015, BWXT sharpened its focus on government and nuclear operations by spinning off its power generation business, allowing it to zero in on opportunities like those emerging from China's ambitious plans.
BWXT’s Strategic Moves in the Nuclear Landscape
Over the past few months, Babcock & Wilcox has been actively capitalizing on the rising interest in nuclear technology, driven by global security needs, clean energy initiatives, and medical advancements.
The company's subsidiary, Nuclear Fuel Services, Inc., recently secured a contract with the National Nuclear Security Administration (NNSA) to conduct a yearlong engineering study to explore deploying a centrifuge pilot plant to establish a domestic uranium enrichment capability for national security purposes. Given BWXT's specialized infrastructure and expertise in handling uranium, this aligns perfectly with their strategic focus on strengthening the nuclear fuel cycle for defense purposes.
On the medical front, BWXT Medical Ltd., another subsidiary, has entered into a Master Services Agreement (MSA) with NorthStar Medical Radioisotopes, LLC. This partnership focuses on producing actinium-225 (Ac-225), a vital medical isotope in targeted cancer therapies. The collaboration underscores BWXT's commitment to advancing medical technologies, particularly cancer treatment and diagnostic imaging.
Moreover, on June 6, the company was awarded the second phase of a contract with the Wyoming Energy Authority to evaluate the feasibility of deploying small-scale nuclear reactors in Wyoming to bolster the state’s energy resilience. Further expanding its technological reach, BWXT, in collaboration with Rolls-Royce, secured funding from the UK Space Agency’s International Bilateral Fund (IBF). This $1.5 million award supports joint efforts to advance nuclear fission systems for space missions, a venture that could benefit both UK and U.S. space programs.
Earlier this year, Babcock & Wilcox made a significant investment in expanding its Cambridge manufacturing plant in Canada. The C$80 million ($59.28 million) expansion is expected to increase the facility’s footprint by 25%, enhancing its capacity to meet the growing demand for nuclear components, including those for Small Modular Reactors and advanced reactors.
Together, these developments demonstrate the increasing appetite for nuclear solutions across the global security, clean energy, and medical markets, ultimately driving growth opportunities for BWXT.
Bottom Line: Should You Invest in BWXT?
Financially, Babcock & Wilcox is on a solid footing. In the second quarter of 2024, the company reported a revenue of $681.50 million, up 11% year-over-year and above the analysts’ expectations of $639.19 million. On the bottom line, its non-GAAP attributable net income amounted to $75.40 million or $0.82 per share, indicating an increase of 26% from the prior year. It also surpassed the consensus EPS estimate of $0.74 per share, which is impressive.
Buoyed by this performance, BWXT raised its EPS guidance for 2024 from $3.05 - $3.20 to $3.10 - $3.20, signaling confidence in its trajectory. The company’s diverse footprint across nuclear technology sectors gives it a broad runway for growth. It is well-positioned to capitalize on major trends, such as extending reactor lifespans, securing nuclear fuel processing contracts, and leading clinical trials for cancer treatment radioisotopes.
Positioned as a leader in nuclear technology, BWXT benefits from trends in defense, energy, and medicine. Its strong presence in defense, particularly in submarine construction, aligns with the growing need for green energy and medical radioisotopes. Analysts remain optimistic about BWXT's long-term prospects, citing robust demand in naval shipbuilding, nuclear propulsion, and potential government contracts, supporting a Buy rating with price targets around $113-$115.
With BWXT outpacing the market with gains of over 32% so far this year and nearly 40% over the past 12 months, now could be an opportune time to consider adding this stock to your portfolio.
