Wall Street impressed by space stock Maxar's latest earnings, which cleared 'a high bar'

Published Thu, Aug 6 202010:57 AM EDTUpdated Thu, Aug 6 20204:03 PM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

(This story is for CNBC PRO subscribers only.) Maxar Technologies , one of the few publicly traded space companies, reported second-quarter earnings that largely impressed analysts, as the company delivered better than expected results on both the top and bottom lines. "We think that Maxar's Q2 should clear a high bar following strong stock performance the past week," J.P. Morgan Chase analysts told clients. "Bookings were strong, as expected, but Q2 growth was solidly above expectations ... the likelihood of positive [free cash flow] in 2021 is growing." Shares of Maxar jumped 20.7% in trading Thursday, breaking above $25 to its highest levels since October 2018. The stock is up over 50% so far in 2020, pushing its market value to about $1.4 billion. "We believe MAXR's elevated leverage will constrain the stock's valuation multiples until the launch of [its Legion satellites] draws nearer, and we're apprehensive of timing risk," BMO wrote in a note. "That said, the outlook for the business has clearly improved, given a better backlog and return to profitability in the Space Infrastructure segment." Here's what every major Wall Street analyst had to say about Maxar's earnings. J.P. Morgan's Benjamin Arnstein — Overweight, increased price target $25 from $20 "We think that Maxar's Q2 should clear a high bar following strong stock performance the past week ... Bookings were strong, as expected, but Q2 growth was solidly above expectations and the 31% EBITDA margin was +500bp y/y. Guidance is raised for the beat but cash flow, which was positive, was not similarly raised and management has been careful to avoid setting high expectations on this critical metric. Longer term, the cash ramp for Maxar remains fully intact and we are raising our price target to reflect growing confidence in the business outlook and turnaround ... The likelihood of positive FCF in 2021 is growing. Maxar has not yet committed to generating cash next year but we see a plausible path based on growing cash EBITDA and falling capex ... Q2 Space profits demonstrate long term potential." RBC's Steve Arthur — Outperform, increased price target to $25 from $21 "Maxar delivered Q2 results well ahead of expectations, demonstrating the necessity of its solutions to government and commercial customers, as well as improved operating performance. Both business segments outperformed on both revenue and margins. The shares have performed well in recent months, though we think they still offer attractive risk/reward ... Maxar delivered solid Q2 results while working through COVID shutdowns, restrictions, and related inefficiencies, showing Y/Y growth and handily exceeding expectations. Operating improvements over the past year-plus are in evidence, with stronger revenue and higher margins in both the Earth Intelligence and Space Infrastructure segments. We continue to see multiple drivers of long-term earnings growth, with Maxar uniquely positioned to deliver on key opportunities ... Q2 results exceed forecast on all metrics." BMO's Thanos Moschopoulos — Market perform, increased price target to $24 from $19 "We remain Market Perform and have raised our estimates and target price following Q2/20 results, which were significantly above consensus. We believe MAXR's elevated leverage will constrain the stock's valuation multiples until the launch of Legion (and the subsequent EBITDA/FCF ramp) draws nearer, and we're apprehensive of timing risk. That said, the outlook for the business has clearly improved, given a better backlog and return to profitability in the Space Infrastructure segment." Canaccord Genuity's Ken Herbert — Hold, increased price target to $22 from $17 "Management remained confident about Maxar's competitive position on a new EnhancedView contracting vehicle in 2020. The Pentagon is expected to make the new contract open to additional commercial providers, which could reduce Maxar's share of wallet relative to their current sole-source position ... Maxar's management prudently utilized the proceeds from the MDA divestiture to reduce its leverage. During the quarter, Maxar repurchased $511M of one of its term loans and $150M of the company's 2023 notes ... The company also now has no maturities due until EOY 2023, well after the Legion satellites have been placed into orbit and begin generating recurring revenues." CIBC's Stephanie Price — Neutral, increased price target to $24 from $19.50 "Maxar continues to effectively de-lever the business, while creating multiple avenues for growth. The company beat consensus estimates on revenue, adjusted EBITDA and EPS as strong sales and margin expansion in the Space Infrastructure business paved the way for a strong quarter. The majority of the proceeds from the sale of MDA Canada were used to pay down term debt, and reduce leverage to 4.4x, well within its 7.5x covenant. Management provided updated 2020 guidance that pointed to a return to full-year revenue growth in the Space Infrastructure segment." – CNBC's Michael Bloom contributed to this report. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

An artist's rendering of WorldView Legion satellites in orbit.

Maxar

(This story is for CNBC PRO subscribers only.)

Maxar Technologies, one of the few publicly traded space companies, reported second-quarter earnings that largely impressed analysts, as the company delivered better than expected results on both the top and bottom lines.

"We think that Maxar's Q2 should clear a high bar following strong stock performance the past week," J.P. Morgan Chase analysts told clients. "Bookings were strong, as expected, but Q2 growth was solidly above expectations ... the likelihood of positive [free cash flow] in 2021 is growing."

Shares of Maxar jumped 20.7% in trading Thursday, breaking above $25 to its highest levels since October 2018. The stock is up over 50% so far in 2020, pushing its market value to about $1.4 billion.

"We believe MAXR's elevated leverage will constrain the stock's valuation multiples until the launch of [its Legion satellites] draws nearer, and we're apprehensive of timing risk," BMO wrote in a note. "That said, the outlook for the business has clearly improved, given a better backlog and return to profitability in the Space Infrastructure segment."

Here's what every major Wall Street analyst had to say about Maxar's earnings.