Presentation Video

Benhur Investments Hot Stock: Orbital Sciences (NYSE:ORB) June 2008 from Loren Norman on Vimeo.

Who Is Orbital Sciences?

Orbital Sciences (NYSE: ORB) is a space contractor founded in 1982 with a focus on building smaller and more affordable satellites and launch vehicles, with projects in communications, defense systems, scientific research. All of these market segments are trending upwards.

This is a growth stock. Orbital is aiming for 10% growth rate for the next 3-5 years. The company is maintaining its focus on the smaller, growing niches which are underserved by the major aerospace companies. Orbital seeks to continue providing highly-reliable space systems on fast schedules at affordable prices.

Orbital is an R&D stock, at its core. A strong R&D stock with some age will show a gradient of segments, ranging from mature segments which make steady money at a nice margin to fledgling segments which are just emerging with low profit margins but excellent long-term growth. Orbital looks to have legs on this point. Let’s examine their segments:

3 Core Segments

Launch Vehicles

These are literally the rockets that get various systems into space, whether it’s a satellite or a missile. This is the original business Orbital was set up for in the early 1980s, and over 500 launch vehicles have been produced to date. About 177 more of them are under contract, currently. Launch systems represent the mature segment of Orbital’s resources, where they hold a majority share of the market with profit margins at 10%+ and an expected growth of about 10% per year through 2010.

Satellites

Orbital has a strong share of the satellite market, with 145 satellites delivered since ‘82, and 28 more currently contracted. Despite Orbital’s strong position here, the satellite market is not as lucrative, with revenue growth projected at 5-7% and profit margins in the 8-9% range. However, Orbital is the dominant player in the small communications satellite market, with 55% of the segment.

Advanced Space Programs

This is the bleeding edge of R&D for Orbital. In the past 10 years, they have worked on “8 Major Advanced Space Products” which are adjacent to the core offerings. Just last year this segment was spun out into its own group, and with good reason. Its margins are currently only around 6%, but the growth potential looks to be something like 20-25% per year through 2010, and I see no reason why it would stop there.

Some Financial Info

Orbital maintains a high revenue visibility due to a $3.4B contract backlog, which is already 60% of revenue coverage between 2008 and 2010!

Orbital was recently awarded a DoD contract for $100M over the next 10 years, and they also announced earlier this month that they would be manufacturing the Koreasat 6 Communications Satellite for KT Corporation in the Republic of Korea.

Most of the information in this post is derived from the ORB presentation at FBR given on May 28th.