On Friday, Babcock & Wilcox Enterprises (NYSE:BW) experienced a revision in its financial outlook by B. Riley, with the firm lowering the price target on the company's shares to $5 from the previous $6, yet retaining a Buy rating on the stock. The action follows recent announcements from the company regarding its performance and future expectations.
Babcock & Wilcox disclosed on April 10 that it has secured approximately $500 million in contracts year-to-date and has increased its 2024 guidance for adjusted EBITDA from the range of $100-$110 million to a new range of $105-$115 million. This positive outlook is a result of the company's current performance and anticipated growth.
In connection with its financial strategy, Babcock & Wilcox also revealed the initiation of a $50 million at-the-market (ATM) offering program with the collaboration of B. Riley Securities, Seaport Global Securities, and Craig-Hallum Capital Group. This move is aimed at bolstering the company's capital position.
Despite the optimistic developments, B. Riley has adjusted its 2024 adjusted EBITDA estimate for the company slightly upwards from $103 million to $105 million. Additionally, the firm has introduced its 2025 estimates, which anticipate double-digit growth for Babcock & Wilcox.
The revised price target of $5, down from $6, takes into account increased risks associated with leverage and potential seasonal weaknesses in the near term.
B. Riley notes that at approximately $1 per share, Babcock & Wilcox's stock is currently undervalued, suggesting that maintaining liquidity and winning significant contracts in 2024, along with meeting its guidance, could result in a substantial increase in share price over the next one to two years. Hence, the firm maintains its Buy rating on the stock.
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