Toward the end of the lightning round on October 7, a caller asked if they would be making a mistake buying Babcock & Wilcox Enterprises, Inc. (NYSE:BW) at its current level. Jim Cramer responded:
No, no. I mean, you know, you didn’t catch the bubble. It’s all the way down. It’s a pretty good spec at 5 bucks. Don’t put too much money into it, but I think it’s a nice speculation.
His willingness to speculate follows a more frustrated assessment in August, when he questioned whether management’s recovery story was holding up. That discussion reveals what had tested his confidence before this latest recommendation.
Babcock & Wilcox (BW) ranks fifth on our list of 12 Best Industrial Stocks With More Than 50% Upside. See which four industrial stocks rank ahead of BW.
Data Center Power Demand Gives the Recovery Substance
Babcock & Wilcox Enterprises, Inc. has secured a substantial role in supplying electricity infrastructure for AI data centers. In March, it received full notice to proceed on a $2.4 billion agreement with Base Electron, an independent power producer backed by Applied Digital. The project involves 1.2 gigawatts of generation capacity using natural gas-fired boilers and steam turbine systems, with Siemens Energy supplying the turbines.
That work is already contributing to results. Second-quarter revenue reached $319.7 million, up 130% from a year earlier, including $100.7 million from Base Electron. Adjusted EBITDA increased to $21.8 million from $13.9 million, and management raised the upper end of its full-year adjusted EBITDA target to establish a range of $80 million to $105 million. Backlog stood at approximately $2.6 billion, a 530% increase year-over-year. BW also appeared in our earlier article: 26 companies that beat Wall Street’s earnings expectations. That broader earnings roundup offers another perspective on the results behind its recovery.
The company also removed a near-term debt maturity. On August 14, Babcock & Wilcox completed the redemption of all $61.4 million of its remaining 6.50% senior notes due in 2026. That reduces immediate refinancing pressure as the business takes on larger projects. Investors reacted differently to a capital raise in May, when Cramer highlighted BW’s unexpected trading response to a $200 million share offering. It offers a glimpse of how strongly the power-generation opportunity once shaped sentiment.
Cash Generation Still Has Ground to Make Up
The improved balance sheet needs to be considered along with how it was funded. During the first half, Babcock & Wilcox Enterprises, Inc. generated just $0.4 million of operating cash flow and spent $13.7 million on property and equipment. Net proceeds from common-stock issuance were $259.8 million. Shareholders helped finance the stronger cash position through dilution.
Base Electron contributed roughly one-third of quarterly revenue, making delivery on that project especially important. Management said work was progressing on budget, but permitting was still underway at the August update. Given the project’s scale, delays or unexpected costs could have an outsized effect on the recovery.
The share price alone also does not establish that the stock is cheap. The company trades at approximately 20.1x forward earnings, compared with 16.4x for Flowserve, an industrial equipment supplier with exposure to power and other process industries. Their product mixes differ, but the comparison shows that Babcock & Wilcox’s roughly $5 share price does not translate into an obvious earnings discount. Its valuation still requires the expected improvement in profitability to materialize.
Short Sellers Maintain a Substantial Position
As per Insider Monkey’s Q2 data tracking over 1000 hedge funds, there were 38 hedge funds holding Babcock & Wilcox Enterprises, Inc., up slightly from 37 in Q1. Among those hedge funds, Hood River Capital Management was the most prominent shareholder with 13.69 million shares. Short interest was 20.46% of the public float. Fund participation was broadly stable, while roughly one-fifth of the float sold short points to considerable skepticism and the potential for sharp price swings.
Babcock & Wilcox now has a major contract supporting its growth ambitions, and retiring the 2026 notes gives it more breathing room. What shareholders still need is stronger cash generation from the work itself. That makes Cramer’s emphasis on keeping the position small an important part of his recommendation, even after the stock’s decline.
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