Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...
Since ringing the NYSE's closing bell, Maxar stock is down 10%, versus about a 2% gain for the S&P 500. Maxar will soon get a chance to reverse that dynamic, however, when it reports its first set of quarterly earnings results since listing in the U.S. on Thursday. A good result could reverse Maxar's slide, while a bad one could worsen it.
No one knows exactly what Maxar will say (the company hasn't preannounced earnings). But one analyst isn't waiting around to find out -- instead rushing out ahead of earnings and upgrading Maxar today.
Upgrading Maxar Technologies
Today's upgrade comes courtesy of Canadian banker Scotiabank, which raised its rating on Maxar Technologies from sector perform to outperform this morning. We don't yet know a lot about why it's decided to upgrade -- neither StreetInsider.com nor TheFly.com have any details on the upgrade, other than that it happened.
What we do know, though, is that several positive things are happening at Maxar that could make Scotiabank's early endorsement seem prescient.
What's up with Maxar?
Let's start with the latest announcement. Last week, Maxar announced plans to move its U.S. headquarters from San Francisco to Westminster, Colorado. More than just a geographical shift, the move promises to add 800 new jobs to the Westminster facility, nearly doubling Maxar's employment in the area.
At the same time, business appears to be picking up for Maxar in a novel area, and not one this space specialist has been particularly well known for in the past: drones.
According to news updates from the company, this month has seen Maxar win two new drone contracts. In one, Maxar won an 8 million Canadian dollar contract to supply Canada's defense ministry with Maritime Miniature Unmanned Aircraft Systems for use in maritime surveillance. Maxar is partnering with well-known small-drone specialist AeroVironment (NASDAQ:AVAV), and will use the company's new Puma AE maritime drone to service the Canadian Navy's drone requirements. AeroVironment's Puma AE is also being tested out by the U.S. Navy for use on small boats operated by riverine and special operations forces.
In a separate announcement, Maxar confirmed that it has signed up to provide an "unnamed international customer" with "turnkey, unmanned aircraft system (UAS) surveillance services." Here, Maxar will partner with Austrian aerospace company Schiebel and use that company's much larger (440 pounds) Camcopter S-100 to its customer's requirements. No value was stated for the contract.
What it means to investors
Two press releases issued in the weeks just preceding an earnings announcement suggest that Maxar is gearing up to make drones a bigger part of its business, complementing the company's established expertise in space-based surveillance (i.e., imaging satellites). The calculated release of this information just ahead of earnings may also suggest this is a preview of what management will be telling us later this week: a concerted effort to grow earnings at the company.
Speaking of which, growth is a concern at Maxar Technologies. According to data from S&P Global Market Intelligence, Maxar's full-year earnings are expected to plunge by nearly half in comparison to 2016 levels when those earnings come out on Thursday. Analysts are forecasting an immediate bounceback to 2016 levels (and even better) in 2018, however, with strong growth in subsequent years as well. Whether Maxar Technologies' stock can bounce back to where it was before it arrived on the NYSE last year may depend to a large extent on whether the company's guidance this week lives up to analyst expectations.
It's possible Scotiabank thinks it will. On Thursday, we'll find out if they are right.