[Satellite TODAY 04-24-13] Orbital Sciences had an encouraging first quarter with net profits reaching $19.6 million, an increase of $6.6 million. However, revenues for the quarter were slightly down at $334.8 million. Chris Quilty, senior vice president at Raymond James said in a research note that the results were “stronger than expected.” 

 

    Explaining why revenues showed a slight decrease, Quilty said, “Revenues declined 1 percent to $335 million (consensus $352 million) due primarily to a 9.4 percent decline in the satellite & space segment (decreased commercial satellite activity). Areas of strength included launch vehicles and missile defense interceptors.” Raymond James has an “outperform” rating on the stock.

 

    David Thompson, Orbital’s chairman and CEO said that while the company’s revenues did not increase in the first quarter, it reported “solid financial results that were driven by operating profit margin improvements in all three of our business segments.” Quilty also believes the results represent a “solid start” for the company in 2013.

 

    Orbital also announced earlier in the week that it has completed a successful test launch of its new Antares rocket from the Mid-Atlantic Regional Spaceport (MARS) located at NASA’s Wallops Flight Facility in eastern Virginia. Lift-off took place at 5:00 p.m. (EDT) on Monday April 21, followed by payload separation approximately 10 minutes later and mission completion at about 18 minutes after launch, once the rocket’s upper stage completed planned maneuvers to distance itself from the payload. Quilty is optimistic that this could lead to more business for the company.

 

     “Orbital expects to fly Antares twice more in 2013, including a Commercial Orbital Transportation Services (COTS) demonstration mission to the International Space Station (ISS) and the first mission (of eight) to the ISS under the company’s $1.9 billion Commercial Resupply Services (CRS) contract with NASA,” he added.

 

    A successful Antares program could lead to a number of opportunities for the company. “Over the next 12 months, Orbital will be assessing the opportunity to expand the Antares program to include: (1) a possible CRS extension, assuming the ISS is extended beyond 2020, (2) bidding on the U.S. Air Force Orbital/Suborbital 3 (OSP-3) launch program, and (3) bidding on the NASA Launch Services II contract,” Quilty said. “Orbital is also exploring the opportunity of using the Cygnus spacecraft as an on-orbit laboratory or a commercial hosted payload platform.”

 

    However, while there are opportunities, there are also a number of challenges. “Orbital currently has enough AJ-26 engines to complete 10 COTS/CRS missions for NASA, but must secure additional engines in order to capitalize on the opportunities mentioned above. Options include: (1) purchasing the 6-10 engines in Aerojet’s remaining inventory, (2) sourcing additional engines from the Kuznetsov Russian design bureau that originally built the engines in the 1970s, or (3) developing and manufacturing a new liquid-fueled engine to replace the AJ-26,” Quilty noted.

 

    While the defense/government market in the United States is still a tough place to do business, Quilty does not think Orbital will be too badly impacted. “While not entirely out of the woods yet, Orbital’s DoD/NASA budget risk appears to be much diminished following recent congressional and White House budget actions. Longer-term, we view Orbital as a clear beneficiary of government efforts to ‘disaggregate’ large satellite systems into smaller (more numerous) platforms,” he said.