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Maxar Technologies still has work to do, says BMO Capital Markets

BMO Capital Maxar

BMO Capital Maxar There’s still work to do for Maxar Technologies (Maxar Technologies Stock Quote, Chart, News NYSE:MAXR), according to BMO Capital analyst Thanos Moschopoulos, who after the company’s quarterly earnings report maintained his “Hold” rating with a price target of $8.00 per share.

US and Canadian space tech company Maxar Technologies has been on the ropes for more than a year, as the former MacDonald, Dettwiler and Associates attempts to deal with a number of setbacks including a write-down of its satellite business, looming debt concerns, a short-seller attack on its accounting practices and the loss of one of its key revenue-generating satellites earlier this year.

As a result, the stock has plunged 82 per cent over the past 12 months. But Maxar management is attempting to right the ship, with the company’s latest quarter standing as testament to the turnaround. Maxar’s fiscal Q2 2019 featured a 15-per-cent decline in sales with consolidated revenues coming in at $490 million, with its adjusted EBITDA generating $129 million versus $133 million a year ago. The result was EPS of $2.45 per share in comparison to a GAAP loss of $0.70 per share for last year’s Q2. (All figures in US dollars.)

In the conference call following the financials, Maxar president, CEO and director Daniel L. Jablonsky said that the company’s top priority has been to reduce debt and leverage levels, saying that they’re “leaving no rock unturned,” and aiming at EBITDA growth for the second half of 2019.

For the quarter, Jablonsky pointed to continued progress in positioning Maxar’s MDA, Imagery and Services businesses for long-term growth and reducing the company’s cost structure.

During the call on August 7, Moschopoulos asked management about its Imagery and MDA segments, looking for Jablonsky’s take on general market conditions.

“Can you give us an update in terms of what you’re seeing on the commercial GEO market? And I think you alluded to the pipeline, some opportunities in the pipeline, any signs of improvement in recent months on both the prime side and then the subcontracting side for MDA?” said Moschopoulos.

In response, Jablonsky pointed out that there have been a number of awards of late in the geostationary orbit satellite business (GEO Comsat), a key segment for Maxar, with the CEO asserting that the GEO Comsat market is heading in the right direction.

“We’re seeing some strong positive trends, some recapitalization efforts getting started. Some customers are letting us know that their capabilities have been outstripped by the demand in the marketplace. And if they had more assets on orbit right now, they’ll be selling them out. So even on some of the programs we got in development are being pushed really hard to see how we can go faster and make sure we’re keeping them through the milestone phases. I’m cautiously optimistic,” said Jablonsky.

On Maxar’s MDA segment, Jablonsky was also upbeat, saying recent announcements about the low earth orbit communications will be “very good” for MDA.

Breaking down Maxar’s quarter, the company had $257 million in its Space Systems revenue compared to $330 million a year prior and $201 million in its Imagery revenue compared to $212 million a year prior. On earnings, Imagery continues to be the money-maker, coming in with $123 million in adjusted EBITDA compared to $28 million from Space Systems.

BMO keeps “Hold” rating on Maxar Technologies

Moschopoulos’ $8.00 target represented a projected 12-month return of zero per cent at the time of publication.

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