Why BWX Technologies Stock Just Popped
Key Points
GE Vernova and BWX Technologies will build a small modular reactor in Tennessee.
The U.S. Department of Energy will contribute $400 million to the effort.
More contracts may follow, if this one is successful.
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BWX Technologies (NYSE: BWXT) stock, which manufactures components for nuclear power plants, jumped 3.5% through 2:45 p.m. ET Thursday. It's not hard to guess why.
Yesterday, the U.S. Department of Energy announced it will award $400 million to the Tennessee Valley Authority to accelerate deployment of new advanced light-water small modular reactors (SMRs) at the Clinch River site in East Tennessee.
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What's BWX Technologies' role?
Clinch River will see installation of America's first-ever "Gen III+ SMR." GE Vernova Hitachi (NYSE: GEV) will build the reactor, a BWRX-300 model, aiming to deploy additional units at a later date. Multiple other companies and organizations will assist with the effort.
These include electric power utility Duke Energy, Oak Ridge Associated Universities, the Electric Power Research Institute, metals manufacturers Scot Forge and North American Forgemasters, Canadian construction company Aecon, and... BWX.
Of particular note, the press release on the project notes Clich River will serve "as a national model for how to deploy SMRs safely, efficiently, and affordably". In other words, it's a pilot project -- and if all goes well, more contracts may follow.
Is BWX stock a buy?
That probably relieves investors who've seen BWX's stock price slump 16% over the past month. But even at today's lower price, should you buy BWX stock on today's news?
Much as I'd like to answer "yes," I'm honestly uncertain.
BWX shares cost more than 52 times earnings after all, and most analysts who follow the stock don't see BWX growing earnings much faster than 12% annually over the next five years. That gives BWX stock a price-to-earnings ratio of more than 4.3 -- very expensive unless Clinch River generates significantly faster earnings growth than virtually anyone on Wall Street expects.
From where I sit, BWX stock still looks too expensive to buy.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BWX Technologies. The Motley Fool recommends Duke Energy and Ge Vernova. The Motley Fool has a disclosure policy.
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