Unexpected costs and project delays are the bane of a management teams. These issues create so many other problems within the business model, that eventually both the top and bottom lines are negatively impacted. This is the situation facing our Zacks Bear of the Day, Babcock & Wilcox Enterprises, Inc. (BW - Free Report) .
This Zacks Ranked #5 (Strong Sell) offers energy technology and services primarily for the nuclear, fossil and renewable power markets as well as a premier advanced technology and mission critical defense contractor. Babcock & Wilcox Enterprises, Inc. is headquartered in Charlotte, N.C.
Recent Earnings Data
On the last day in February, management posted Q4 16 earnings where they missed both the Zacks consensus earnings and revenue estimates for the third consecutive quarter. And it was not a slight miss either; the Zacks EPS consensus was at $0.46, BW reported -$1.60, Zacks Revenue consensus was at $491 million, BW reported $380 million.
The main reason for the big misses was their Renewable segment. This area saw revenues fall from $115.2 million in Q4 15, to $55.6 million in Q4 16 as costs increased and schedules were lengthened on several contracts. Further, the segment posted a gross loss of $82.6 million in Q4 16, $103.7 million lower than the $21.1 million gross profit posted in Q4 15. As a result of the errors, the company has appointed a new management team to fix their issues.
Decreased Guidance
Due to productivity and schedule issues in the Renewable segment management reduced adjusted EPS guidance to a range of $0.75-$0.95, below the previous guidance of a range of $1.25-$1.45. The total impact from the Renewable projects issues is expected to cost above $25 million in 2017.
Management’s Take
According to Mr. E. James Ferland, Chairman and Chief Executive Officer, “During our 18 months as an independent company, we have made significant progress realigning the business and executing on our strategic goals. In 2016, we focused on enhancing the profitability of our Power business and increasing revenue diversification by driving the growth of our Industrial and Renewable businesses. Through the restructuring of our Power business, we have created a leaner, more flexible organization that is better positioned to compete in the market. In our Industrial segment, we have made key acquisitions to build the business and grow our B&W-wide non-coal revenue to greater than 50% of our total revenues in 2016. Productivity and schedule issues in our Renewable segment, however, significantly impacted our results in the fourth quarter and for the full year. We have taken specific actions to address these issues, and to enhance the resources and infrastructure of the Renewable segment, better enabling it to profitably capture long-term market opportunities. We are confident in our strategy and believe that the Company is well positioned to create long-term value for shareholders.”
Price and Consensus Graph
As you can see in the graph below, both the company’s stock price and future earnings estimates have fallen off a cliff in a very short period of time.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Unexpected costs and project delays are the bane of a management teams. These issues create so many other problems within the business model, that eventually both the top and bottom lines are negatively impacted. This is the situation facing our Zacks Bear of the Day, Babcock & Wilcox Enterprises, Inc. (BW - Free Report) .
This Zacks Ranked #5 (Strong Sell) offers energy technology and services primarily for the nuclear, fossil and renewable power markets as well as a premier advanced technology and mission critical defense contractor. Babcock & Wilcox Enterprises, Inc. is headquartered in Charlotte, N.C.
Recent Earnings Data
On the last day in February, management posted Q4 16 earnings where they missed both the Zacks consensus earnings and revenue estimates for the third consecutive quarter. And it was not a slight miss either; the Zacks EPS consensus was at $0.46, BW reported -$1.60, Zacks Revenue consensus was at $491 million, BW reported $380 million.
The main reason for the big misses was their Renewable segment. This area saw revenues fall from $115.2 million in Q4 15, to $55.6 million in Q4 16 as costs increased and schedules were lengthened on several contracts. Further, the segment posted a gross loss of $82.6 million in Q4 16, $103.7 million lower than the $21.1 million gross profit posted in Q4 15. As a result of the errors, the company has appointed a new management team to fix their issues.
Decreased Guidance
Due to productivity and schedule issues in the Renewable segment management reduced adjusted EPS guidance to a range of $0.75-$0.95, below the previous guidance of a range of $1.25-$1.45. The total impact from the Renewable projects issues is expected to cost above $25 million in 2017.
Management’s Take
According to Mr. E. James Ferland, Chairman and Chief Executive Officer, “During our 18 months as an independent company, we have made significant progress realigning the business and executing on our strategic goals. In 2016, we focused on enhancing the profitability of our Power business and increasing revenue diversification by driving the growth of our Industrial and Renewable businesses. Through the restructuring of our Power business, we have created a leaner, more flexible organization that is better positioned to compete in the market. In our Industrial segment, we have made key acquisitions to build the business and grow our B&W-wide non-coal revenue to greater than 50% of our total revenues in 2016. Productivity and schedule issues in our Renewable segment, however, significantly impacted our results in the fourth quarter and for the full year. We have taken specific actions to address these issues, and to enhance the resources and infrastructure of the Renewable segment, better enabling it to profitably capture long-term market opportunities. We are confident in our strategy and believe that the Company is well positioned to create long-term value for shareholders.”
Price and Consensus Graph
As you can see in the graph below, both the company’s stock price and future earnings estimates have fallen off a cliff in a very short period of time.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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