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Maxar (MAXR) Down 13.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Maxar Technologies (MAXR). Shares have lost about 13.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Maxar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Maxar’s Q3 Earnings Beat Estimates, Revenues Miss

Maxar reported mixed third-quarter 2021 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same.

The company made progress on its growth plans, with solid bookings in both the Earth Intelligence and Space Infrastructure segments. Notable awards included the 11th renewal of the EnhancedView program, another renewal of the Global Enhanced GEOINT Delivery program, and an award to continue the development and operations of a classified big data analytics program.

Maxar also inked a deal with a fifth U.S. ally to upgrade the country’s ground infrastructure to be Legion ready and it was awarded contracts to build two new Geosynchronous Equatorial Orbit satellites for Sirius XM. Maxar advanced the Legion construction program and expects to launch the first two satellites between March and June 2022.

Net Income

Net income from continuing operations was $14 million or 19 cents per share compared with $84 million or $1.32 per share in the prior-year quarter. Despite an increase in operating income, net income declined mainly due to lower other income and no income tax benefit. The bottom line beat the Zacks Consensus Estimate by 4 cents, delivering a surprise of 26.7%.

Revenues

Quarterly total revenues remained stable year over year at $437 million. The Earth Intelligence segment’s revenues were inclusive of a $20 million decrease in the recognition of deferred revenues related to the EnhancedView contract. While Product revenues increased to $166 million from $161 million year over year, Service revenues decreased to $271 million from $275 million. The top line missed the consensus estimate of $453 million.

Segment-wise, revenues from Earth Intelligence declined 1.1% year over year to $271 million. The decrease was primarily due to a $20 million fall in the recognition of deferred revenues related to the EnhancedView contract and a $6 million decline in revenues from the U.S. government. The segment’s adjusted EBITDA declined to $124 million from $128 million a year ago.

Revenues from Space Infrastructure declined 0.6% year over year to $180 million due to a $16 million decrease in revenues from U.S. government contracts. Adjusted EBITDA increased to $14 million from $12 million.

Other Details

Operating income increased to $37 million from $7 million in the prior-year quarter. Total adjusted EBITDA was $113 million compared with $112 million a year ago, with respective margins of 25.9% and 25.7%.

Maxar generated solid cash flow in the quarter and good year-over-year revenue and adjusted EBITDA growth, considering deferred revenues included in last year’s results. The performance in Earth Intelligence was driven by growth in commercial and international defense and intelligence customers. Space Infrastructure benefited from commercial awards offset by the timing of work on certain government programs. Maxar has raised the full-year guidance for adjusted EBITDA and cash flow.

Cash Flow & Liquidity

During the first nine months of 2021, Maxar generated $185 million of cash from operating activities compared with $132 million in the prior-year period. As of Sep 30, 2021, the company had $36 million in cash and cash equivalents with $2,064 million of long-term debt.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -91.56% due to these changes.

VGM Scores

At this time, Maxar has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Maxar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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