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Why Maxar Technologies Stock Is Green on a Red Day for the Market

By Rich Smith - Updated Feb 25, 2021 at 1:28PM

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Maxar burned cash in 2020 but could earn some in 2021.

What happened

Ouch. Today isn't a happy one for stock market investors, with the Dow Jones Industrial Average down 1.4% in 1:20 p.m. EST afternoon trading and the Nasdaq off by 2.6%. At least one stock's shareholders are pleased today: Maxar Technologies (MAXR 1.88%) stock is up 3%.

So what's got Maxar investors smiling?

Arrow angles up on a green stock chart.

Image source: Getty Images.

So what

Last night, Maxar reported its fourth-quarter and full-year 2020 financial results. For the year, revenues grew a modest 3%, but profits nearly tripled, to $4.99 per diluted share. Quarterly results were kind of the reverse -- sales up 14% but with a loss of $0.65 per share on the bottom line versus last year's $0.70 Q4 profit.

Free cash flow (FCF) for the year was negative $119 million.  

Investors seem to be accentuating the positive, though, and focusing on the future. As Maxar CEO Dan Jablonsky explained, Maxar spent most of 2020 restructuring itself to emphasize its Earth Intelligence (photographs from orbit) and Space Infrastructure (satellite parts) businesses while reducing its debt load to help "drive sustainable growth." Backlogs are up as a result, and the company has completed the sale of its MDA businesses to private equity, replacing them with more imagery assets by taking full control of Vricon, a 3D geospatial company. Long-term debt -- while still sizable at $2.4 billion -- has been shaved from $2.9 billion a year ago.

Now what

Going forward, Maxar expects "to see revenue and Adjusted EBITDA growth and an improvement in free cash flow" in 2021. The company has "also increased our 2023 targets to better reflect the earnings and cash generation power we see ahead." Curiously, Maxar didn't go into any more detail on any of these points. It didn't tell us what it expects to do in terms of revenue this year, how much it expects to earn on those revenues, or how much cash it expects to generate.

For what it's worth, though, analysts polled by S&P Global Market Intelligence forecast $1.8 billion in revenue for this year (up 7% from 2020 and growing twice as fast as last year), with negative generally accepted accounting principles (GAAP) earnings but positive pro forma profits, and $56 million in free cash flow.

Valued on that last number, Maxar looks to be trading at about 51 times FCF today -- more, if you factor in the company's debt. That seems kind of steep for a 7% grower if you ask me, but today, it seems good enough to make Maxar's investors happy.

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