SpaceX Failure Seen as Net Benefit to Orbital-ATK (OA)

Over the weekend, SpaceX experienced a launch failure on its 7th launch under CRS 1. The details on what went wrong still are emerging, but as of NASA's 6/28 mid-day de-briefing, the exact cause is yet unknown. Cowen analyst Gautam Khanna said SpaceX's CRS mission failure may be a net benefit to Orbital-ATK (NYSE: OA). The firm maintained an Outperform rating and price target of $86.00.

Khanna see three potential positives to OA from SpaceX's launch failure:

(1) Both major U.S. CRS providers have now suffered a launch failure, making their respective track records more "equal" ahead of the CRS 2 recompete in Sept. The SpaceX failure, coupled with OA's Oct. 2014 failure, underscores the risks inherent in space launches -- failures are uncommon, but not extraordinarily rare events, something the customer (NASA) clearly understands. We don't believe the launch failures make either SpaceX or OA less likely to prevail in the CRS 2 recompete.

(2) Extension missions under CRS 1 appear more likely. NASA awarded OA an extension mission earlier this year, which extends OA's CRS 1 work through H1:17. Additional missions may be awarded (under CRS 1 pricing terms) given the need for redundancy, even as CRS 2 work will build. If awarded, this could extend OA's earnings visibility through C17, irrespective of the CRS 2 recompete.

(3) NASA may try to pull forward one or more of OA's CRS 1 launches (e.g. from Dec 2015 to Oct 2015), which could benefit OA's EBIT and cash flow sooner. During NASA's 6/28 de-brief, NASA affirmed that OA's new cargo vessel and new rocket technology are on schedule, consistent with OA mgmt's assertions. The ISS astronaut crew is not at risk of critical food/provision shortages, despite the recent mission failures, as Russia (through the Progress vehicle) & Japan (through the HTV vehicle) also supply the ISS and have upcoming missions.

For an analyst ratings summary and ratings history on Orbital-ATK click here. For more ratings news on Orbital-ATK click here.

Shares of Orbital-ATK closed at $75.82 yesterday.

You May Also Be Interested In

• Growth isn't weak enough to truly undercut inflation pressures - BMO
• 'A moment of truth' for Tesla and Musk is here - Wedbush
• Super Micro Computer (SMCI) now down nearly 20%