NASA Rejects Trojan Horse

"NASA, rejecting aerospace giants Lockheed (NYSE: LMT  ) and Boeing (NYSE: BA  ) , awarded $3.5 billion in contracts to start-up companies on Tuesday to deliver cargo to the International Space Station after the U.S. space shuttles are retired."
-- Reuters

On Christmas Eve-Eve, NASA finally announced the results of its long-running Commercial Resupply Services competition, and as the tidbit above correctly points out, neither Lockheed nor Boeing (nor Alliant Techsystems (NYSE: ATK  ) , for that matter) wound up in the winners circle. What you may not know, is that none of these three companies were actually bidding for the contract at all, at least not directly.

Instead, these three giants of the aerospace industry chose to hitch their carts to a foal of a company named PlanetSpace, which acted as the prime contractor in the bid. Turns out, NASA was not amused -- nor impressed.

Instead of awarding its $3.5 billion in cosmic-milk-run contracts to "Big Space" in the person of little PlanetSpace, NASA went with trusted workhorses this time:

  • Orbital Sciences (NYSE: ORB  ) will make eight deliveries to the International Space Station, and be paid $1.9 billion for its trouble.
  • SpaceX -- the cosmic project that Elon Musk took up after selling his beloved PayPal to eBay (Nasdaq: EBAY  ) -- gets $1.6 billion to make a dozen runs.

Now, Reuters may consider these two firms "start-ups", but the fact is that unlike PlanetSpace, both have already been vetted by NASA, and found superior. In the recent Commercial Orbital Transportation Services (COTS) contest, for example, Motley Fool Rule Breakers recommendation Orbital (25 years old, and so hardly a start-up) received $171 million worth of funding. Meanwhile, SpaceX got off to a running start with a $278 million contract of its own. (Not bad for a start-up, eh?)

What's it mean to you?
Obviously, you cannot invest in privately held SpaceX and share in its success -- yet. Orbital, in contrast, has been racking up win after win in this cosmic sphere. Selling for a 17 P/E , and with long-term growth posited at only 15%, Orbital may not look like a great buy. But the company generates free cash flow far in excess of its reported GAAP earnings, and is moving fast to capture market share in the medium-size launch rocket business with its Taurus II vehicle.

Foolish takeaway
With a string of contract wins that just keeps growing, an attractive price, and sky-high growth prospects, this is one rocket stock that could well live up to its name.

For further reading on the final frontier, why not try out:

Orbital Sciences is a Motley Fool Rule Breakers recommendation. eBay is a Motley Fool Stock Advisor selection. 

Fool contributor Rich Smith owns shares of Boeing. The Motley Fool has a disclosure policy.

Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 26, 2008, at 7:43 PM, rockymtnman wrote:

    Rich Smith needs to take a lesson or 2 on how to write. He tries to be so cute with poorly associated metaphores that his main message is LOST. Without re-reading the material, its difficult to tell who won the contract. He should also do a little research before taking jabs. NASA asked for the contract to be bid in the way it was - with major aerospace contractors as subs to smaller, lesser known companies.

  • Report this Comment On December 26, 2008, at 10:50 PM, jimpiccard wrote:

    It's unfortunate that Rich does his usual shallow job of knocking organizations and industires he's unfamiliar with, while getting around to what he does consider his job - finding a way to praise a Motley Fool newsletter pick.

    ".. PlanetSpace, which acted as the prime contractor in the bid. Turns out, NASA was not amused -- nor impressed.

    Instead of awarding its $3.5 billion in cosmic-milk-run contracts to "Big Space" in the person of little PlanetSpace, NASA went with trusted workhorses this time:".

    Firstly, each company in the PlanetSpace/Lockheed Martin/Boeing/ATK team had a specific role, PlanetSpace's role was to provide the financing (which they did in fact line up); the other three experienced companies were to provide technical management, hardware production, integration and operations.

    Secondly, calling SpaceEx (which I admire greatly) and ORB "trusted workhorses" - implying the other 4 companiers were not - is getting things so backwards it's sad. Neither SpaceEx or ORB has done anything like the mission they've been hired to perform; we are all hoping that one - preferably both - will succeed. UNLIKE them, however, the PlanetSpace team includes the only three companies that HAVE done exactly this sort of mission - and more - from the US side; ie, via the space shutttle (which those three built and still operate), suppling not only cargo to the Space Station (what the COTS contract is limited to), but human transportation up and down, as well.

    Once again, I strongly recommend that TMF require a minimum level of knowledge from their columnists. And that they stop requiring them to act like the bad-ol' investment banks of old, which wrote their opinions supposedly objectively, but in fact were hocking companies their parent banks wanted them to hock. TMF is doing way to much of the same thing by constantly hocking paid Newsletter picks, even if it means writing misleading articles. Let's shape up, guys.

  • Report this Comment On December 27, 2008, at 11:26 AM, NASAGeek wrote:

    I am extremely disappointed in this TMF Article. I work for NASA and am familiar with the COTS and CRS contracts. This TMF article is clearly based on superficial knowledge. What is worse is that the superficial knowledge is incorrectly interpretted by someone obviously unfamiliar with the industry and specific situation. I would hate for anyone to base any investment decisions off of this article. This is well below the standards I would expect of TMF.

  • Report this Comment On December 27, 2008, at 7:53 PM, colospaceman wrote:

    Just a few facts for our ill-informed colleague and author of this disappointing and clearly axe-grinding article:

    - The Apollo spacecraft and Space Shuttle orbiter, among others, we built by Rockwell, which is now part of Boeing Integrated Defense Systems.

    - The external tank on the space shuttle, as well as the Titan and Atlas launch vehicles (before the creation of United Space Alliance) are built by Lockheed Martin Space Systems Company.

    - ATK makes the solid rocket boosters for the space shuttle.

    - 90% of commercial space cargo today is launched on either the Delta or Atlas launch vehicles - both of which are products of United Space Alliance, which is a joint venture between Boeing and Lockheed Martin.

    The point being, making a statement like "NASA went with trusted workhorses this time" is ignorant to the point of absurdity, when trying to compare SpaceX and ORB to a competitor who, collectively, has put 90% of the total orbital cargo, and 100% of the human beings who have gone, into space.

    There are plenty of reasons to be excited about the coming commercial space race, and SpaceX and Orbital are fine companies with a bright future. However, investors must understand that these companies are NOT the "old workhorses" of the industry, they ARE playing ball in a field that they have never been in before, and investors looking to put some Aerospace into their portfolio should weigh the potential and risks of the players based on actual facts.

  • Report this Comment On June 08, 2012, at 9:57 PM, gas69000A wrote:

    What do I buy I need to make back 4 5 grand I lost

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