Strike two! Boeing (NYSE:BA) is out.
Last month, we told you about Lockheed Martin's (NYSE:LMT) ambitious plan to get NASA to pay for the former to develop a new type of space tug spaceship to operate in Earth's orbit. NASA wasn't amused by Lockheed's attempt to lasso its research and development budget to build the "Jupiter" tug. Not only did NASA decline to pay, but it also kicked Lockheed out of the $14 billion competition to take over "CRS" supply runs to the International Space Station (ISS).
Now, NASA's done the exact same thing to Boeing.
Strike two, big bidders
Competition for the lucrative Commercial Resupply Services-2 (CRS-2) contract is dwindling fast. With Lockheed Martin and Boeing -- NASA's two biggest contractors -- out of the running, there are currently just three other companies still working to win CRS-2. Namely:
- Publicly traded Orbital ATK (NYSE:OA), currently one of two companies working on CRS-2's predecessor project, CRS-1.
- Privately owned SpaceX, also a CRS-1 contractor.
- Privately owned Sierra Nevada Corporation -- the only one of the three that has yet to win a CRS contract.
Present plans call for CRS-1 to continue running through about the first quarter of 2018. But NASA will choose a new contractor, or team of contractors, to perform CRS-2 before CRS-1 draws to a close -- probably no later than Jan. 30, 2016.
Media reports suggest that CRS-2 should be worth anywhere from $1 billion to $3.5 billion to the company(ies) that win(s) it, though at least one source posits a total value of $14 billion over a term of years. That number may be an outlier -- or it may not. After all, CRS-1 was initially valued at "only" $3.5 billion when first awarded to SpaceX and Orbital ATK back in 2008. CRS-1 was, however, later expanded and its value increased to $6.2 billion for resupply missions running through 2017. Thus, while $14 billion still sounds like a stretch, it's not outside the realm of possibility.
What it means to Boeing
Losing out on the CRS-2 contract is undoubtedly a big blow to Boeing. Assuming the contract will in fact one day be worth $14 billion to the winner(s), well, that's an amount equal to 80% of the revenue that Boeing's space business takes in annually.
Still, the company is not without prospects. After all, last year Boeing was one of just two companies picked by NASA (SpaceX was the other) to ferry astronauts to the ISS aboard its CST-100 Starliner capsule beginning in 2017. That contract alone is expected to be worth $4.2 billion to Boeing. True, it would have been nice if Boeing could have repurposed Starliner for supply runs to ISS as well, but $4.2 billion is still a nice consolation prize.
And further out, Boeing plays the lead role in NASA's multibillion-dollar, multidecade Space Launch System -- the interplanetary transport project could eventually produce as much as $100 billion for the companies participating in it. As primary contractor on SLS, Boeing's almost certain to win a lion's share of that cash.
What it means to investors
When you get right down to it, the upshot of NASA's CRS-2 announcement this month is probably just this: It's great news for SpaceX and for Orbital ATK. As the incumbent contractors on CRS-1, they were always the favorites to win follow-on work in CRS-2. And with the two giants of America's space industry, Lockheed Martin and Boeing, out of the running, their path to victory seems even clearer.
For Boeing investors, on the other hand, the news that Boeing is no longer under consideration comes as a severe disappointment. But getting dropped from the project also means Boeing can spend less time worrying about milk-run missions to ISS. It frees the company up to think about bigger things -- like landing a man on Mars. So losing out on CRS-2 may not be the bad news it seems to be.
Onward and upward, Boeing. You've still got new worlds to explore.
Rich Smith does not own shares of, nor is he short, any company named above. You can find him on Motley Fool CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 275 out of more than 75,000 rated members. You can also follow him on Facebook for all the latest in defense news.
The Motley Fool recommends Orbital ATK. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.