Galloway Capital Partners takes 4.31% stake in Babcock & Wilcox

Galloway Capital Partners and Diveroli Investment Group disclosed a 4.31% stake in Babcock & Wilcox Enterprises (BW), citing the company's undervaluation based on a 39% increase in 2024 bookings to $889.6 million, a 47% rise in backlog to $540.1 million, and the potential of its BrightLoop technology. While Q1 2025 revenue beat estimates at $181.2 million, the company reported a larger-than-expected loss per share of $0.26; DA Davidson maintains a Neutral rating with a $1.00 price target, acknowledging the potential benefits of BW's debt refinancing efforts.

Analysis

Investment firm Galloway Capital Partners, along with its affiliate Diveroli Investment Group, has disclosed a 4.31% ownership stake in Babcock & Wilcox Enterprises, Inc. (BW), asserting the company's stock is undervalued. This assessment is underpinned by several factors: a 39% increase in 2024 bookings to $889.6 million and a 47% rise in backlog to $540.1 million, indicating potential revenue growth for 2025-2026. Additionally, BW's proprietary BrightLoop technology, focused on hydrogen and carbon capture, is anticipated to reach commercialization by 2026 with a target of approximately $1 billion in bookings by 2028. An operational turnaround is also cited, with a 13% rise in adjusted EBITDA in 2024 (excluding BrightLoop) and a net debt to EBITDA ratio of approximately 3x. The increasing demand for power infrastructure due to AI-driven data centers further positions BW to benefit. However, recent Q1 2025 results present a mixed financial picture; while revenue of $181.2 million surpassed the $159.9 million forecast, the loss per share was $0.26, larger than the anticipated $0.14 loss. To manage its debt, BW completed an exchange involving existing senior notes for $101 million of new 8.75% Senior Secured Second Lien Notes due 2030. DA Davidson maintains a Neutral rating on BW with a $1.00 price target, acknowledging the positive potential of successful refinancing and strong demand evidenced by backlog and bookings, but the earnings miss highlights ongoing profitability challenges.

Key Decisions for Investors

• Investors should weigh the undervaluation thesis presented by Galloway Capital, driven by strong bookings and BrightLoop's potential, against the recent Q1 2025 earnings per share miss and existing debt levels.
• Monitor Babcock & Wilcox's execution on commercializing its BrightLoop technology by the 2026 target and its ability to convert its significant backlog into profitable revenue streams.
• Evaluate the effectiveness of the recent debt refinancing in improving the company's financial stability and its progress towards sustained positive adjusted EBITDA, considering the execution risks highlighted by the recent financial performance.