SEAL BEACH, Calif. -(Dow Jones)- Boeing Co. (NYSE: BA - news) 's (BA) Space and Communications unit will lead a newly formed team to pursue a potential multibillion-dollar contract for the U.S. Navy's new satellite-based mobile communications system.
Other team members include ViaSat Inc. (VSAT), TRW Inc. (NYSE: TRW - news) (TRW), Harris Corp. ( HRS), Science Application International Corp. and Hughes Network Systems, a unit of Hughes Electronics Corp. (GMH)
In a press release Wednesday, Boeing said the Navy will select two teams to receive $40 million, 14-month Component Advanced Development contracts, and one of the teams will be selected for a multibillion-dollar production contract late next year....
ViaSat [VSAT] has been awarded $6 million in orders from the U.S. Army for its multifunctional information distribution system low volume terminals (MIDS LVT) and engineering support. The orders are for airborne terminals for F-16 and F-18 platforms, and ground-based terminals for the Army.
MIDS LVT terminals provide secure, high capacity, jam resistant, digital data and voice communications capability for U.S. Navy, Air Force and Army platforms. The engineering support work is ongoing and initial terminal deliveries are expected to commence in April 2003.
Lots of things wrong, lots of things right. Here are a couple recent analyst blurbs that represent the current sentiment:
Lehman-- Investment Conclusion: We believe much of the recent weakness in ViaSat shares stems from this quarter's unfavorable earnings outlook. We and management have had modest expectations for the company's fiscal 4Q02 for some time; unfortunately, our sentiment is unchanged. Our 2-Buy recommendation is justified by the company's long-term defense outlook. However, for short-term horizons, we believe the sidelines are preferable given the immediate earnings trend.
Needham-- Summary · VSAT will report its March-ending 4QF02 quarter in mid-May. We think the quarter will likely be generally in-line with our revenue estimate of $46 million and probably exceed our Street-low $0.13 EPS. · We believe the outlook for VSAT’s commercial broadband initiatives remains challenging; however, we believe the company continues to have a significant pipeline of opportunities—many of which may be decided in the May-June timeframe—that will have a major bearing on the company’s broadband ramp in 2H03 and beyond. · The company’s pipeline of military opportunities remains substantial, including significant ramps in MIDS and Infosec encryptions devices, but significant revenue from some of these newer programs is unlikely to be seen until early fiscal 2004. · While we remain comfortable with our current F2003 estimates of $214 million and $0.59 EPS, our F2H03 ramp still requires a degree of broadband success. Additionally, we believe the Street consensus $0.13 EPS 1QF03 estimate will likely have to move towards our Street-low $0.08 estimate. · Deferred receivable collections related to slippage of the MIDS schedule and Boeing will likely result in DSO exceeding the already high 134 days from last quarter. Though we expect a significant chunk of receivables will be collected in June, we do not expect the receivables levels to be viewed positively on the May earnings call. · We maintain our Buy rating based on the company’s longer term prospects, though we see little urgency to purchase the shares in front of what we believe will be an lackluster 4QF02 earnings report in May.
Add to this sentiment a CFRA report that came out on April 19th, and you have a stock in the crapper. Tomorrow's report won't help as the issues will still remain. Hopefully the conference call will add details that soothe nervous investors.
Let's look at each point in the CFRA report and see what could/should be said tomorrow:
Surging Receivables--I am afraid they will surge further. Boeing and MIDS owes money. Milestones were hit after the close of the quarter. What I'd like to hear is how much has the number dropped since end of quarter, what/who/why about the receivables, and when this will be resolved.
Earnings boost one time tax credit--I don't consider this an issue. If they are recovering R&D tax credits from previous quarters, then it is not "cheating"--these are earnings that were due them one way or another
Negative operating cash flow--likely to recur based on the first point above. Unknown how th eother inputs of working capital will affect it.
High Level of Total Inventory and Surge in Finished Goods--I'd like good explanation of the inventory numbers, including finished goods and their makeup. It will be interesting to see if these change dramatically.
Slowing revenue growth/declining pro-forma revenue growth--no argument here. No growth is more like it. This won't change until new contracts flow in.
Drop in Backlog from contract cancellations--no argument here either. This needs to be rebuilt. We should hear something about both Astrolink and WildBlue that may or may not give us hope about pumping that backlog back up. Perhaps iPSTAR is one that could also pump it up. The defense awards to come should help as well. Book to bill last quarter was over 1, so this should improve.
Gross margin decline--I expect even more decline as they spend money trying to bag the myriad of contracts out there.
Bankruptcy of customer--yep--should write off Orbcomm this quarter. Next up, Astrolink.
Here is what I would like to hear about, in addition to the accounting issues of the last post:
WildBlue update--do or die date Astrolink update--do or die date iPSTAR possibilities large VSAT orders/Linkstar(i.e. Eutelsat) antenna systems--defense progress(there are mobile Ka contracts as well as gateway upgrades/additions for the DoD) ArcLight status SurfBeam status and potential in the market Ka-SAT for the Army Other Wideband gapfiller contracts being bid MIDS Infosec--more details! Link-16 projects All the partnered contracts such as FAB-T, JTRS, MUOS, etc.