Why Babcock & Wilcox Stock Surged After Missing Earnings Today
Key Points
Babcock & Wilcox missed badly on earnings this morning.
But Babcock's order book just got 20x bigger, which should power profits this year and next.
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Babcock & Wilcox (NYSE: BW) stock, the Akron, Ohio-based manufacturer of steam boilers and hydrogen gas production equipment, exploded (in a good way) Monday morning, soaring 24.9% through 11 a.m. ET despite badly missing analyst earnings forecasts for Q1.
The earnings miss was the bad news. The good news is that Babcock handily beat sales forecasts.
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Heading into the report, analysts expected Babcock to report a $0.04 per share pro forma loss on quarterly sales of $157.2 million. In fact, the company lost $0.60 per share -- but its sales were a strong $214.4 million.
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Babcock & Wilcox Q1 earnings
Babcock's sales leapt 44% higher year over year. Operating costs rose to match, also up 44%, leaving the company with only a small operating loss for the quarter, and basically unchanged year over year.
The real damage was done by an accounting charge for "non-cash warrant and stock appreciation rights," which subtracted a further $81.8 million from profits, leaving the company with a $0.60 per share loss on the bottom line. But for those charges, Babcock says it would have ended the quarter with a small positive profit for its "adjusted" net income from continuing operations.
Presumably, this is the part of the report that investors are cheering today.
What's next for Babcock?
Well, that, and the forecast. Turning to guidance, Babcock pointed to a 17% increase in its global pipeline of work, a 483% increase in backlog, and a near 2,000% increase in new orders booked in the quarter.
That all works out to a staggeringly large book-to-bill ratio of 11.7, indicating strong sales growth ahead.
No wonder analysts think Babcock, which lost money last year, will become profitable this year, and more than triple its earnings next year.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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