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Orbital ATK Backs Govt Satellite Orders to Help Offset Weak Commercial Market Demand

Orbital ATK Ramjet Test FacilityOrbital ATK (NYSE: OA) said Tuesday the aerospace and defense contractor sees satellite orders from military and other government agencies as a counterbalance to continued soft demand from commercial customers.

CEO David Thompson told investors the Dulles, Virginia-based company forecasts orders from the defense community, NASA and other science agencies to represent 75-80 percent of Orbital ATK’s total satellite revenue versus the 55-60 percent range over the last three years.

Commercial customers have in turn represented nearly 35-40 percent of satellite sales since 2013 and Orbital ATK expects that range to come down to 20-25 percent by 2018 in light of the ongoing downturn, Thompson said.

Orbital ATK estimates commercial satellite customers have placed a total of 11 orders across the industry this year and the company received one, which Thompson said was the only purchase of that group in the contractor’s power- and size-class.

“We expect the order slump to continue for some time as major operators rethink their fleet plans and react to downward pressure on transponder prices as major additions to their capacity in the production pipeline now come online, “ Thompson added.

In addition, Chief Financial Officer Garrett Pierce said in the conference call with analysts Orbital ATK is still working on three years of financial restatements related to accounting errors from a 10-year U.S. Army ammunition production contract.

The company said in regulatory filings last week it narrowed its expected pre-tax losses from the contract to $350 million from the previous $400 million-$450 million outlook issued when the accounting review was first disclosed Aug. 20.

PwC and Deloitte are working with Orbital ATK on the revisions and the contractor believes the accounting issues are isolated to the ammunition contract and impact no other programs, Pierce said.

Orbital ATK did not disclose third quarter results but held to its current guidance of $5.30-$5.50 earnings per share and $4.45 billion-$4.5 billion in revenue versus Wall Street’s consensus forecast of $5.51 EPS and $4.46 billion in sales.

New orders, option bookings and exercised options totaled $2.04 billion for the third quarter with the year-to-date sum at around $7.5 billion as of Sept. 30.

Shares in Orbital ATK traded up 4.21 percent to $79.42 as of 12:45 p.m. Eastern time.

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