For investors who bought Boeing (BA 2.64%) stock on the theory that it's a leading space company, things are getting down to the wire.
Late last year, I described how Boeing was likely to benefit as United Launch Alliance (ULA), its 50-50 joint venture with Lockheed Martin (LMT 1.13%), embarked upon an ambitious plan to launch its new Vulcan Centaur rocket 20 times this year, collecting approximately $100 million per launch. As the new rocket proved its value and the company worked out the kinks and gained experience launching it, this launch cadence would rapidly ramp up to 20 or even 30 launches over the next few years.
Half these launches, said ULA CEO Tory Bruno, would be commercial launches for corporate customers. The other half would be missions for the U.S. government, including national security missions for the Pentagon. For the second half of this equation to work, however, for ULA to achieve the launch cadences it was targeting, and for Boeing to fully benefit from the revenue produced by these launches, one thing had to happen first: ULA needed to win certification from the U.S. Space Force, confirming its new launch vehicle is dependable enough to entrust with launching satellites that cost $1 billion and up apiece.
This has not yet happened.
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Key Data Points
The Pentagon is making ULA wait
Why not? Well, the story goes like this. ULA launched Vulcan for the first time ever -- and successfully -- in January 2024. It launched a second Vulcan rocket in October, but that one was less successful.
Although the rocket and its payload made it to orbit, one of the solid rocket boosters (SRBs) attached to Vulcan, which gave the rocket its initial oomph, suffered an anomaly when its nozzle fell off mid-flight. Northrop Grumman (NOC 1.19%) actually built the glitchy SRB, but ULA got blamed for it. Although the Federal Aviation Administration initially thought the anomaly no big deal, and waved off the idea of investigating the mishap "at this time," it seems to have had a rethink.
In December, Bruno confidently predicted Space Force would go ahead and certify his rocket "this month, next month, [or in the] next few months." But it's getting toward the end of March, and no decision has yet been made.
Image source: Getty Images.
What this means for ULA, and for Boeing
Last month, SpaceNews quoted Bruno confirming that the glitchy SRB started falling apart midair because of a "manufacturing defect" in an insulator within the booster nozzle. ULA has, he said, "isolated the root cause [and tested it to confirm this,] and made appropriate corrective actions." It's also informed Space Force of its findings in hopes of speeding along the certification process.
While Bruno remains hopeful a decision to certify Vulcan will come quickly, he's learned not to make promises that Space Force might not keep, and isn't saying anymore when he thinks certification will happen. What he did say is that, with the year nearly one-quarter over already, and precisely zero new Vulcan launches having yet happened, ULA is ratcheting back its 2025 target to 12 launches this year.
What's more, only about half of these will be Vulcan launches. The rest will be launches of the company's few remaining Atlas V rockets, conducting both commercial and military missions.
As the launch cadence decelerates from 20 to 12, ULA will probably collect 40% less revenue than it had hoped. This implies perhaps $800 million less 2025 revenue for ULA, and if you apply Lockheed's 9.5% space division profit margin to that number (ULA is a private company, so we have to work with what little data we have), that might mean $39 million less profit going to Lockheed and $39 million less for Boeing, this year.
Things can always get worse
For a $120 billion aerospace company that's already losing nearly $12 billion a year, that's probably not a big enough loss to matter much to Boeing investors. Still, it's money Boeing could have used, and money Boeing now will not get.
The bigger worry for investors is what happens if Space Force takes even longer certifying ULA's new rocket? Bruno himself highlighted last week a recent Bloomberg report raising Space Force concerns about ULA's performance on its most recent National Security Space Launch (NSSL) contract, and hinting Space Force might take away future launch contracts from ULA, and reassign them to SpaceX.
For his part, Bruno says he's not concerned, arguing Bloomberg's report contains "inaccuracies" and is "overtaken by events." Still, if there's anything to the report, it would imply even fewer launches for ULA this year, even less revenue for ULA, and even less profit for Boeing as parent company.
If you're an investor in Boeing stock, you'll want to pay close attention as this story develops.
