Space exploration Companies
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SpaceX's Falcon 9 rocket lifting off from space launch complex 40 at Cape Canaveral, Florida, June 28, 2015. It exploded minutes later.
The company is also more entrepreneurial than other defense contractors, said Quilty, who has an outperform rating on Orbital. "Both prior companies had affordable, agile product development, " he added.
Boeing goes beyond jets
Most big defense companies have a space presence, too, said Sterne Agee senior research analyst Peter Arment.
Several years ago, Boeing forged a joint venture with Lockheed Martin called the United Launch Alliance, which has several government contracts for launch services, like rockets and national security satellites. Boeing's earnings from the space rocket alliance are still relatively small for the giant aerospace company. But the alliance already handles most of the nation's space launches and is introducing new, cheaper Vulcan rockets in 2019 that will better compete with SpaceX, which had a glowing track record until the recent explosion.
Boeing is also developing its own CST-100 spaceship, which can carry up to seven astronauts. Last year Boeing got $4.2 billion in funding from NASA for the spaceship, which is slated to carry astronauts to the International Space Station by 2017.
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But Boeing's revenues are mainly driven by demand for its jet planes. Along with Airbus, Boeing has a near monopoly on the commercial aircraft business. And air travel has consistently grown 1.5 percent faster than the GDP long-term, according to Morningstar estimates.
"Boeing will be generating a lot of cash, " added Arment, who has a buy rating on Boeing. "And investors are paying attention."
Morningstar senior equity analyst Neal Dihora agrees. He said that Boeing is benefiting as airlines replace existing aircraft with ones that use less fuel. "The next five years of growth is locked and loaded, " said Dihora, since Boeing has a massive order backlog of 5, 700 airplanes—or about five years' worth of sales. He expects Boeing's revenue, now at .7 billion, to accelerate 7.2 percent, to 2 billion, in 2016 alone.
Lockheed Martin also has its Orion spacecraft, which is designed for deep-space exploration. And last year, the company bought Astrotech Space Operations, a satellite launch-preparation services company, to add to its space portfolio. "The acquisition brought small satellite capability, " Arment said, so the company can add a new niche.
But the company also relies heavily on Department of Defense spending for fighter aircraft, missile defense systems and many other defense products, which has driven revenues over the past three years, said Arment. According to Morningstar estimates, Lockheed Martin is slated to have slightly declining revenues, as defense spending cuts kick in. Currently, space systems account for only 18 percent of 2014 revenues of $45.6 billion, according to Morgan Stanley research.
Still, the company is also investor-friendly, added Arment, and has had stable revenues, stock buybacks and a hefty 3.2 percent dividend yield.
The rise of satellite technology
Like SpaceX, other companies are banking on satellites, too.
DigitalGlobe offers high-resolution satellite imaging that scans the Earth and then maps or analyzes the images, which is a fast-growing industry. Once dependent on government contracts, the satellite operator is increasingly snagging big commercial customers, like Yahoo and Apple, said Quilty, along with operating five satellites for Google.
"The company can remotely measure the height of oil storage tanks or give post-tornado damage assessments, " said Quilty, who has a strong buy on the stock. Revenue, now at $654.6 million, is slated to grow 10 percent per year, he added, for several years.