BWX (BWXT)

Aerospace and defense company BWX (NYSE:BWXT) announced better-than-expected revenue in Q3 CY2025, with sales up 28.9% year on year to $866.3 million. On the other hand, the company’s full-year revenue guidance of $3.1 billion at the midpoint came in 0.5% below analysts’ estimates. Its non-GAAP profit of $1 per share was 16.5% above analysts’ consensus estimates.

Company Overview

Contributing components and materials to the famous Manhattan Project in the 1940s, BWX (NYSE:BWXT) is a manufacturer and service provider of nuclear components and fuel for government and commercial industries.

Defense contractors typically require technical expertise and government clearance. Companies in this sector can also enjoy long-term contracts with government bodies, leading to more predictable revenues. Combined, these factors create high barriers to entry and can lead to limited competition. Lately, geopolitical tensions–whether it be Russia’s invasion of Ukraine or China’s aggression towards Taiwan–highlight the need for defense spending. On the other hand, demand for these products can ebb and flow with defense budgets and even who is president, as different administrations can have vastly different ideas of how to allocate federal funds.

BWX’s peers and competitors include Lockheed Martin (NYSE:LMT) and Honeywell (NASDAQ:HON).

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, BWX grew its sales at a decent 8.1% compounded annual growth rate. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. BWX’s annualized revenue growth of 13% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its most important segments, Government Operations and Commercial Operations, which are 71.2% and 29% of revenue. Over the last two years, BWX’s Government Operations revenue (public sector sales) averaged 10.1% year-on-year growth while its Commercial Operations revenue (private sector sales) averaged 27.5% growth.

This quarter, BWX reported robust year-on-year revenue growth of 28.9%, and its $866.3 million of revenue topped Wall Street estimates by 9.2%.

Looking ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, a deceleration versus the last two years. Still, this projection is admirable and indicates the market is forecasting success for its products and services.

BWX has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 15%.

Analyzing the trend in its profitability, BWX’s operating margin decreased by 2.7 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, BWX generated an operating margin profit margin of 13.1%, down 1.3 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

BWX’s EPS grew at an unimpressive 5.1% compounded annual growth rate over the last five years, lower than its 8.1% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into BWX’s earnings to better understand the drivers of its performance. As we mentioned earlier, BWX’s operating margin declined by 2.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For BWX, its two-year annual EPS growth of 14.2% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q3, BWX reported adjusted EPS of $1, up from $0.83 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects BWX’s full-year EPS of $3.85 to stay about the same.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

BWX has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.4% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that BWX’s margin expanded by 16.9 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

BWX’s free cash flow clocked in at $94.9 million in Q3, equivalent to a 11% margin. Its cash flow turned positive after being negative in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although BWX hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14.2%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Uneventfully, BWX’s ROIC has stayed the same over the last few years. Given the company’s underwhelming financial performance in other areas, we’d like to see its returns improve before recommending the stock.

BWX reported $82.65 million of cash and $1.51 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $557.1 million of EBITDA over the last 12 months, we view BWX’s 2.6× net-debt-to-EBITDA ratio as safe. We also see its $14.24 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly BWX blew past analysts’ revenue expectations this quarter. We were also glad its Government Operations revenue topped Wall Street’s estimates. On the other hand, its full-year revenue guidance slightly missed. Overall, we think this was still a solid quarter, but the guidance shortfall seems to be weighing on shares. The stock traded down 1.2% to $213.50 immediately following the results.

Updated: December 4, 2025 at 10:21 PM EST

Before investing in or passing on BWX, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

There are things to like about BWX. First off, its revenue growth was decent over the last five years and is expected to accelerate over the next 12 months. And while its projected EPS for the next year is lacking, its rising cash profitability gives it more optionality. On top of that, its strong operating margins show it’s a well-run business.

BWX’s P/E ratio based on the next 12 months is 44.2x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in. This is a good one to add to your watchlist - there are better opportunities elsewhere at the moment.

Wall Street analysts have a consensus one-year price target of $221.22 on the company (compared to the current share price of $181.65).