Space might be the final frontier, but Orbital ATK (OA +0.00%) is finding it to be a very profitable place to be right now. That was abundantly clear from the company's third-quarter results, which were released before the opening bell on Tuesday. That report showed earnings rocketing higher entirely due to the strength of its Space Systems Group.
Orbital ATK results: The raw numbers
|
Q3 2015 Actuals |
Q3 2014 Actuals |
Growth (YOY) | |
|---|---|---|---|
|
Adjusted Revenue |
$1.135 billion |
$1.112 billion |
2.1% |
|
Adjusted Operating Income |
$134.9 million |
$120.5 million |
12% |
|
Adjusted EPS |
$1.35 |
$1.15 |
20.5% |
Data source: Orbital ATK.
What happened with Orbital ATK this quarter?
Orbital ATK reported better-than-expected results.
- While the 2% increase in revenue was meager, it could have been much worse. Revenue declined within Orbital ATK's Flight Systems Group and Defense Systems Group by 11.4% and 7%, respectively. Those declines, however, were completely offset by a 31.9% surge in revenue within the Space Systems Group.
- Fueling the strong result within Space Systems was higher revenue in both the Commercial Satellite Division and the Civil and Defense Satellite Division.
- Space Systems was also the fuel behind the stronger earnings with its operating income surging 80.7% year over year thanks to an improvement in its operating margin from 8.2% last year to 11.2% in the third quarter.
- This helped offset weakness in the company's other two groups, with both seeing a year-over-year decrease in operating income.
- The other big highlight on the quarter was the near-record new order bookings of $2.81 billion, which pushed the company's total backlog up to $13.8 billion.
What management had to say
In commenting on the quarter, CEO David Thompson had this to say:
Orbital ATK's third quarter was a period of solid progress for the company on multiple fronts... In addition to better-than-expected financial results, we also booked near-record new orders that included several large and strategically important contracts, such as our first major synergy-enabled win. The company also continued its outstanding execution on our existing major programs.
The new order booking in particular are important because they'll drive future revenue growth. That is due in part to the fact that the company booked more than double its current quarter revenue in new orders, which is a key indicator of future growth. Furthermore, Orbital ATK now has a backlog that, if all the options are exercised, represents a couple of years' worth of revenue.
CFO Garrett Pierce also chimed in on the company's results, which he noted were "highlighted by strong growth in the Space Systems Group." What's worth pointing out about this is the fact that this wasn't an industrywide trend. Rival Lockheed Martin (LMT 0.21%) saw quite the opposite, with its Space Systems revenue slipping 5%. Lockheed Martin specifically noted that it saw a $70 million decrease in revenue from various government satellite programs due to decreased volume. This weakness pushed Lockheed's operating profit and operating margins in its Space Systems segment lower year over year.
Looking forward
Thanks to its strong results this quarter, Orbital ATK expects to end the year on a higher note with the company tweaking its full-year guidance a little bit, which is noted on the chart below.
|
Guidance |
Previous 2015 Guidance |
Current 2015 |
|---|---|---|
|
Revenues ($ in millions) |
$4,425-$4,500 |
$4,450-$4,500 |
|
Operating Income Profit Margin |
10.5%-11% |
10.75%-11% |
|
Diluted Earnings Per Share |
$4.60-$4.80 |
$4.75-$4.85 |
|
Free Cash Flow ($ in millions) |
$225-$275 |
$225-$275 |
Data source: Orbital ATK.
Finally, to go along with those slightly stronger earnings, the company also sees strong new order bookings continuing. As Thompson noted, "Looking ahead to the fourth quarter, we anticipate another period of robust new order activity and operational milestones, including our next cargo delivery mission to the International Space Station for NASA." Those orders are the key to fueling revenue and earnings growth in future quarters.
