For five quarters running, rocket maker Orbital Sciences (NYSE:ORB) has blasted past Wall Street's earnings predictions, even as its stock took a dive. Can this Motley Fool Rule Breakers pick regain altitude on the back of tomorrow's Q3 numbers? Let's find out.

What analysts say:

  • Buy, sell, or waffle? Six out of seven analysts polled rate Orbital a buy. The other guy has it parked in a holding orbit.
  • Revenue. On average, they're looking for quarterly sales to fall 4% to $277.8 million.
  • Earnings. Profits are predicted to drop 23% to $0.20 per share.

What management says:
Orbital's been busy these past few months, but you wouldn't know it from the firm's SEC pages. 8-K filings are rarer than a blue moon over there, so to get the skinny on happenings at this firm, you need to train your telescope on Yahoo! Finance, and keep a sharp eye out for press releases announcing news like last month's Minotaur II+ launch in support of the Air Force's NFIRE program, the award of a new Minotaur IV launch contract, also for the Air Force, and the August contract to build a new comm bird for Intelsat.

What management does:
Orbital's been going through a bit of a profits slump over the past 18 months as its cost of goods sold keeps eating away at the gross margin. SG&A seem remarkably consistent, however, varying little from quarter to quarter, while R&D spending has tripled through the first half of this year, as compared to H1 2007. All of this has Orbital's operating margins hovering at a level well below what peers Northrop Grumman (NYSE:NOC), Boeing (NYSE:BA), and Lockheed Martin (NYSE:LMT) pull down.

Margins

3/07

6/07

9/07

12/07

3/08

6/08

Gross

19.1%

18.3%

17.6%

17.3%

17.3%

17.9%

Operating

8.3%

8.2%

8.2%

8.0%

7.8%

8.0%

Net

4.5%

4.7%

5.0%

5.2%

5.1%

6.0%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
On the plus side, Orbital continues to generate free cash flow in abundance -- well above the levels of profitability that its GAAP numbers might suggest. Over the past 12 months, Orbital has collected just under $92 million in free cash flow.

I have to say that the resulting price-to-free cash flow ratio on this one -- 12 times -- looks mighty attractive relative to analysts' projected 18% long-term growth rate. I don't throw the term "dirt cheap" around lightly, but Orbital is starting to look worthy of the title.

For further cosmic Foolishness, scroll your telescope down yonder:

Orbital Sciences is a Motley Fool Rule Breakers pick. Try this market-beating publication free for 30 days.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool's disclosure policy sees all, shows all.