By proving itself to NASA, Orbital Sciences opens door to new opportunities


Cygnus (Orbital Science)
October 27, 2013

What Orbital Sciences had been hoping for happened last week: Cygnus, its cargo spacecraft, disintegrated into a billion pieces when it reentered Earth’s atmosphere.

Although that might not sound like good news, it was for the Dulles-based space company. The craft’s destruction was a planned event, the final step in a crucial test to show NASA that the company could successfully transport supplies to the crew of six astronauts on the international space station.

That achievement marks a significant milestone for Orbital, one of two private companies NASA has turned to since it retired the space shuttle. NASA handed over the resupply missions to Orbital and SpaceX, a Hawthorne, Calif.-based company, so that it can focus on deep-space journeys.

Now, having completed two successful launches of its Antares rocket, Orbital can proceed as planned with eight more flights scheduled through 2016 as part of its $1.9 billion cargo resupply services contract with NASA. The latest accomplishment positions Orbital well to re-compete for the next cargo resupply contract, which is expected in a year or two.

But perhaps just as significant, the strong performance by Antares opens the door to new opportunities.

“With two really good launches now under our belt, things are picking up in terms of customer interest,” Orbital president and chief executive David W. Thompson said in an Oct. 17 conference call with investment analysts. “We have one specific pursuit that we’re engaged in now with a commercial customer.”

Thompson did not identify the customer.

Any additional interest in Antares beyond NASA could prove to be a windfall for Orbital.

“They put all this money into the Antares rocket to develop it,” said William Loomis, managing director at the financial services firm Stifel Nicolaus. “The more they can use it outside of NASA . . . you’re leveraging your past investments and getting higher incremental returns.”

Five years ago, when NASA picked Orbital over giants in the space industry such as Lockheed Martin and Boeing, it was quite a coup for the local maker of small- to medium-size space systems.

The win brought the commercial space industry to the Washington area. Orbital’s highly anticipated launch of the Antares rocket from the Mid-Atlantic Regional Spaceport at Wallops Island, Va., on Sept. 18 was visible in the region. Its Cygnus payload docked with the space station about 10 days later, and the craft offloaded about 1,500 pounds of cargo and detached from the station Tuesday, with barely a hiccup.

That mission followed closely on the heels of Orbital’s third-quarter earnings report, which received mixed reactions. For years, analysts had been concerned about the company’s heavy spending on research and development. So they were pleased to see that cash flow from operations was $31.5 million in the third quarter, compared with a negative $20.8 million a year ago.

However, revenue and net income were down for the three-month period ended Sept. 29, compared with the same period last year. Revenue totaled $322 million, a drop of nearly $51 million, or 14 percent, compared with 2012. Net income was $15.6 million, or 26 cents a share, down from $19.5 million, or 33 cents a share, in 2012.

Some of the decline in revenue was because of the soft market for satellite and space systems. Loomis says he thinks that sector hit bottom last quarter and that activity should pick up. According to Orbital spokesman Barron Beneski, after nine months of no orders for commercial satellites, Orbital has booked four in the past six months.

In all, Orbital appears to have weathered the sequester cuts and the government shutdown with relatively little damage.

“Space is a bigger part of the economy . . . than it has ever been, and that continues to advance,” Beneski said. “Even though there may be sequesters and budget movements and all that, from Orbital’s perspective as a space company, we like where we are.”

Kathy Orton is a reporter and Web editor for the Real Estate section. She covers the Washington metropolitan area housing market.
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