Reprinted courtesy of Cabot Market Letter. Stock of the Month ORBI..(One of my favorites.
THE KING OF OUTER SPACE
>
> Orbital Sciences Corporation
>
> Sixteen years ago a young, ex-NASA engineer named David Thompson struck out
> on his own to create a new company focused on the commercial opportunities
> of space. He was 27 years old. Today his company boasts half a billion
> dollars in annual revenues, nearly half of which comes from his old
> employer! He's diversified his company intelligently, through both
> internal development and acquisition. And all signs point to further
> success in the years ahead, as he steers his company to a position as The
> King of Outer Space!
>
> The company's name is Orbital Sciences, and its bread and butter is rocket
> launches. Its workhorse launch vehicle is its Taurus high capacity rocket,
> which can carry payloads of up to 3,000 pounds into low-earth orbit. For
> commercial communications firms putting satellites in space, Orbital is the
> number one choice to deliver the goods. Since 1990 the company has carried
> out an average of nearly one rocket launch per month, making it the world
> leader in numbers of low-cost satellites launched. But why would the
> government, in particular NASA and the Department of Defense, use a
> commercial provider when they could do it themselves? Because Orbital is
> cheaper!
>
> For smaller payloads, up to 1000 pounds, and at just half the price,
> Orbital has a more innovative launch service named Pegasus. But it's not
> just a smaller rocket. It's a rocket (with payload on board) that is first
> attached to the underside of a company-owned L-1011 "Stargazer" jet and
> carried to a height of about 8 miles over open ocean. Once at altitude,
> Pegasus is dropped. . . . .and after a five-second free-fall, its own
> rocket ignites to take the payload up to its final altitude. An advantage
> of Pegasus is the flexibility to use different launch sites.
>
> Orbital recently boasted six Pegasus launches in eight months, involving 14
> satellites. On April 2, Orbital launched a NASA satellite that will
> monitor solar activity. And note this: In its early years, Orbital had an
> occasional failure. But using its two systems, Orbital had 23 launches in
> 1997, with a 100% success rate.
>
> And the best is yet to come! Back in 1996 Orbital landed a $50 million
> contract to design and build NASA's next-generation, low-cost, reusable
> launch vehicle. (Imagine how much more cost-effective today's space
> shuttle could be if it didn't need those huge boosters to get off the
> ground!) This new vehicle, code-named X-34, will be dropped from the
> underbelly of the company's L-1011, just like a Pegasus rocket. When
> complete, the X-34 is designed to be flown up to 25 times per year,
> attaining altitudes of up to 50 miles at speeds up to Mach 8. Its first
> flight is scheduled for March 1999. Unpowered, it will be released from
> the L-1011 and will glide back to earth and a runway landing. The second
> and final flight, scheduled for August 1999, will include a test of a new
> NASA-developed, single-stage rocket engine. Things must be going well,
> because in January Orbital signed an additional contract for up to $18
> million that calls for a second demonstration vehicle!
>
> David Thompson isn't limiting his vision to rockets, however. In the past
> few years, he's branched out significantly through both internal
> development and acquisition, into a number of complementary fields. First
> come satellites. Orbital is at the forefront of satellite manufacturing
> technology, using mass production and standardization to produce a
> satellite in an average time of one week.
>
> And it doesn't just sell these satellites; it uses them! Orbital's
> Microstar satellites are used in its fast-developing ORBCOMM network that
> will eventually provide for low-cost tracking and data messaging around the
> globe. ORBCOMM will eventually consist of up to 36 satellites in low-earth
> orbit! Then there's the ORBIMAGE family of satellites, which will make
> high-resolution images from space commercially available for the first
> time. Thompson sees a large, immediately addressable market for these
> imagery products.
>
> Of course all these satellites are monitored and controlled by electronic
> systems. . . . .made by Orbital. Its electronics are even used in the
> famous 25,000 pound Hubbell Space Telescope! Closer to earth, Orbital's
> electronics systems are installed by 25 international air forces on their
> front-line fighter aircraft.
>
> Finally, there's the whole GPS business. Its Magellan division, which
> Orbital acquired in 1994, is the world's largest producer of handheld
> satellite navigators. These systems have become commonplace for sailors,
> pilots, hikers, surveyors and more. Coming next is a new Magellan GSC
> messaging system, which combines GPS navigation capability with the ORBCOMM
> network's worldwide, two-way e-mail capability. The GPS division also
> offers the Pathmaster navigation system (acquired in 1997 from Rockwell).
> Pathmaster is already the leading automobile navigation system in the U.S.,
> with over 10,000 units installed, including over 8,000 in Hertz's rental
> car fleet under the name "NeverLost"
>
> Put it all together and you get a tightly integrated company focused on
> reaping commercial benefits from the technologies of space. Its technology
> is leading edge, while its internal synergies combine to make it the most
> efficient and lowest-cost producer. And barriers to competition are high,
> so a company that attains dominance tends to keep it. With visionary
> stem-winder David Thomas at the controls, we think this firm will go far.
>
> Rockets still dominate the company's business; they contributed 88% of
> 1997's revenues. The year-end total order backlog was $2.9 billion! But
> if the firm is to maintain rapid growth, it must succeed in its other
> undertakings, particularly ORBCOMM and ORBIMAGE, which are not profitable
> yet. Long-term, the firm's goal is to grow revenues 20% to 25% over
> several years, while increasing earnings faster. In the fourth quarter of
> 1997, revenues were $177 million, up 47%, while earnings were $.18 per
> share, up 38%. There are 33 million shares of stock, of which management
> owns 3%.
>
> Orbital's stock has been strong all year. It's now trading at new price
> highs. And its RP line is powerful. After a long, seven-year decline,
> this measure of intense buying forecasts fast-growing earnings in the
> quarters ahead. Long-term, we think you can't go wrong here. Space is a
> fast-developing frontier, and Orbital is on track to be The King of Outer
> Space, benefiting from far more than just rockets.
>
> 5-Year Record
> FY Dec
> Sales ($) mill. Earnings $ per share
>
> 1994 302 .33
> 1995 364 (.03)
> 1996 461 .55
> 1997 606 .69
> 1998 est790 .95
>
> Orbital Sciences Corporation
> (ORBI 47 OTC)
> Recommendation: Buy
>
> Address: Orbital Sciences Corporation
> 21700 Atlantic Blvd
> Dulles, VA 20166
> 703-406-5543 |
