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Babcock & Wilcox (BW) Moves 9.1% Higher: Will This Strength Last?

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Babcock & Wilcow Enterprises (BW) shares rallied 9.1% in the last trading session to close at $8.61. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 13.4% gain over the past four weeks.

Babcock & Wilcox Enterprises’ fourth quarter earnings per share and total revenues were better than expected. Despite the impact of COVID-19, the company continues to reap benefit of its cost savings initiatives, strong management and operational efficiency.

The company recently closed common stock and senior notes offering and proceeds were utilized to lower its secured debt by $274 million, which in turn reduced its annual interest payment by $16 million. The company plans to invest more than $5 billion in next three years to further strengthen and expand its business.

Price and Consensus

Price Consensus Chart for BW
Price Consensus Chart for BW

This power generation equipment company is expected to post quarterly loss of $0.38 per share in its upcoming report, which represents a year-over-year change of +47.2%. Revenues are expected to be $135 million, down 9.2% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Babcock & Wilcox, the consensus EPS estimate for the quarter has been revised 40.7% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on BW going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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