The question now is if tailwinds are still strong enough to power Babcock & Wilcox Co (NYSE:BWC)’s sail. Indications are that a further uptick in B&W can’t be discounted. Demand for this Charlotte, NC-based company’s competency in clean energy technology seems headed toward even more robust levels.
Building Obama’s legacy
In the coming weeks, the White House is expected to announce major policy initiatives on carbon emissions for existing power plants, according to a New York Timesreport. Since his reelection, President Barack Obama has been assertive on climate policy and has indicated that a new set of U.S. greenhouse gas standards to help slow global warming shall be a legacy of his administration.
There’s a sense of urgency here. Experts say setting standards such as these has to begin before year-end because it can take years before rules as complex as these can be completely implemented. Also, the imposition of carbon standards on existing utilities would also be costlier as compared to newly-built plants.
A foundation in conversion technology
One of Babcock & Wilcox Co (NYSE:BWC)’s segments, power generation, has an inside track on the demand for clean energy solutions that would be spurred by the expected White House initiatives. This segment is a worldwide supplier of environmental equipment and components and related services. Notably, one of the technologies tat the company’s power generation group provides is conversions to cleaner-burning natural gas of coal-fired boilers that are among the prime targets for carbon emission control.
URS Corp (NYSE:URS), based in San Francisco, CA, is another engineering, construction and technical services company with specialization in clean-air technologies. Among its major projects was the clean-air modification to cut emissions at the fossil plant of the Tennessee Valley Authority (NYSE:TVE) in Bull Run Creek near Oak Ridge, TN.
Significantly, the Southern utility TVA is among the power companies which will likely bear the brunt of spending on the new greenhouse standards being mulled in Washington. Established in 1933 by President Roosevelt, this utility has a number of older coal-burning plants which require upgrades. Already indebted to the tune of $25 billion, the TVA has sought an increase in its capital, but the Obama administration instead seeks its privatization.
Mixed first quarter omens
Results for the 2013 first quarter for URS and Babcock & Wilcox Co (NYSE:BWC), both with market caps of about $3.5 billion, were mixed.
Driven by its power segment, Babcock & Wilcox Co (NYSE:BWC)’s 2013 first quarter revenues rose by $39.5 million or 5.2% year over year to $805.4 million. GAAP earnings-per-share for the first quarter of 2013 was at $0.41, down from $0.50 a year earlier. Adjusted earnings-per-share slipped 8% to $0.46 from $0.50 in the year-ago quarter.
URS Corp (NYSE:URS) saw its revenues up 18.7% year over year in the 2013 first quarter to $2.8 billion from $2.36 billion. Operating income was at $152.6 million for the first quarter of 2013, lower than the $151.4 million posted a year ago. Net income in the most recent quarter amounted to $71.9 million, down from $79.7 million. The company had a diluted earnings-per-share of $0.96 in the first quarter of 2013, compared with $1.07 a year earlier.
Who’s got more to crow about?
| Babcock & Wilcox | URS | |
|---|---|---|
| Profit margin (ttm) | 6.45% | 2.65% |
| Operating margin (ttm) | 7.99% | 5.12% |
| Total cash (mrq) | $354.5 million | $248.8 million |
| Total debt(mrq) | $4.43 million | $2.09 billion |
ttm: trailing twelve-month; mrq: most recent quarter
Competency-wise, URS Corp (NYSE:URS) and B&W are well positioned to achieve improvements in their bottom lines with the looming new carbon emission rules for power plants. Investors beating a path on Babcock & Wilcox Co (NYSE:BWC) now looks more likely though. The company, based on the above metrics culled from Yahoo Finance, can crow about its healthier balance sheet and better profitability. As a final thought, the $2.09 billion debt for URS seems like a ballast that could impair a higher lift off as the U.S. implements new greenhouse gas standards.
The article Who’s Getting a Lift as Power Plants Clean Boilers? originally appeared on Fool.com and is written by Arturo Cuevas.
Arturo Cuevas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Arturo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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