Actionable insights straight to your inbox

Equities logo

Aerojet Rocketdyne is a Key Company in the Rejuvenation of the Space Program

ARJD is closing a great 2019 with even more on the horizon in 2020 and beyond., 3DSculptor

Investing in the space industry is an area to watch as we enter the next decade (regardless of any benefits accruing from Space Force). The space economy is an estimated $400 billion market that is mostly dominated by well-known government-commissioned aerospace companies names like Boeing and Lockheed and Martin, but other companies have made strides in 2019 to position themselves for growth. Increasingly, other sectors are also edging into the space sector as it becomes a new home for technology projects like satellite communication and data analysis. As more companies enter the space industry, it will be no different than technology or other booming sectors.

Propulsion system-maker Aerojet Rocketdyne (originally called Gencorp) is one such company that has created new opportunities for itself thanks to a structural reorganization by CEO Eileen Drake. This is impressive considering that ARJD was responsible for Apollo 11 and has helped launch 1,600 rockets into space. Furthermore, the company’s rocket motors got the Curiosity rover to Mars. Today, Drake’s leadership has propelled the company into reducing costs and also being part of some of the most recent pioneering programs in space travel like the installation of hardware alongside Lockheed Martin for NASA’s Orion spacecraft heading to the moon in 2020. NASA is also launching a crewed mission to the moon in 2022 known as Artemis 2. Aerojet Rocketdyne is directly working on the Artemis 3 moon landing, which is scheduled to land on the lunar south pole in 2024.

Since Drake has come aboard, Aerojet’s revenues have grown 6.6% from 2012 to 2017, while EBITDA has grown 15.6% from 2012 to 2018. In the company’s last filing, net income came in a hair higher than the same time last year at $115.7M compared to $113.8M. Lastly, net billed receivables under long-term contracts compensation was up to $186.5M through September compared to $147.3 through December 2018.

The market has certainly recognized Aerojet’s performance as the stock price has sailed from $18 in 2015 to now comfortably above $40. At the time of writing it sits at $45.98 per share. This year alone AJRD has increased more than 25%, starting the year in the mid-$30 range.

This all comes during a year when there have been some concerns. First, noted short-seller Spruce Point Capital Management wrote a scathing review of the company after ARJD lost to Blue Origins, Jeff Bezos’s company, to equip United Launch Alliance’s AR1 engines. Spruce Point outlined a more competitive future in the solid rocket motor sector.

While it would certainly seem to be the case that competition is coming in the rocket sector, it seems to be a function of the growth of the space sector in general. In short, there are many contracts for Aerojet Rocketdyne to win not only in rockets but also in hypersonic propulsion for the U.S. military’s missile systems. For example, it was announced in September that ARJD will be working with Northrop Grumman to replace U.S. ground-based missile systems.

“Aerojet Rocketdyne is proud to be part of Northrop Grumman’s nationwide GBSD team and excited for the opportunity to provide a large solid rocket motor system and a post-boost propulsion system for this vital defense program,” CEO Drake said in the company announcement.

Bottom line, as the U.S. rejuvenates its space program, missions will increase as well as the space economy as a whole, and Aerojet has the pedigree and technology to be in the mix in every contract.


Equities Contributor: Stephen L. Kanaval

Source: Equities News

The astronomer Carl Sagan said, “It was easy to predict mass car ownership but hard to predict Walmart.”