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Why Maxar Technologies Stock Just Popped 15%

By Rich Smith – Aug 6, 2020 at 12:15PM

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A fortuitously-timed business sale delivered a boatload of profit to Maxar just when it was most needed.

What happened

Investors in Maxar Technologies (MAXR -2.75%) are having a great day Thursday, with shares up a strong 15% in 10:55 a.m. EDT trading after the satellite maker and Earth imagery provider reported second-quarter 2020 financial results last night. Surprisingly, this surge in share price follows a big earnings miss.

Instead of the $1.06 per share in profit on $560.3 million in revenue that analysts had forecast for it, Maxar reported yesterday that its sales were just $439 million and its earnings were precisely zero.  

Stock arrow rising over 2020

Image source: Getty Images.

So what

Actually, that's not precisely correct. Maxar's income from continuing operations was $0.00 in Q2. But the company did close the sale of its MDA space business in April, yielding a $304 million cash haul (after taxes), which worked out to a net profit of $4.94 per diluted share.

Maxar also engineered some significant debt restructuring, buying back some debts and rolling over some others; extended its loan due dates; and reduced its long-term debt load by more than $500 million, even as it trebled cash reserves to $177 million in cash and cash equivalents.

Now what

Investors seem to like the sound of that, and are bidding up Maxar stock strongly today. And here's another thing they might like to hear:

"Demand has remained resilient in the current environment as our customers continue to rely on us for important national security and commercial missions," CEO Dan Jablonsky said in a statement. "We generated another quarter of solid revenue growth in Earth Intelligence while Space Infrastructure returned to growth on the heels of recent diversified bookings from both civil and commercial customers." 

Moreover, with a lighter debt load, Maxar is heading into the third quarter (and beyond) positioned "for sustained revenue, profit and cash flow growth." Maxar raised earnings guidance for this year, and now expects revenue will be at least flat (despite COVID-19), and could even be as good as "mid-single digit growth for 2020."

Growth in a time of pandemic? No wonder shareholders are pleased.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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