Thursday, November 01, 2018

Maxar Technologies Share Price Collapses After Q3 Earnings Report Released

          By Henry Stewart

On the upside, most everyone agrees that Brampton ON based MDA Space Missions (a subsidiary of Westminster CO based Maxar Technologies) is a US company and will likely become even more of a US based company by the end of the year, so the Canadian government likely won't feel the need to bail it out by purchasing any more expensive third generation Canadarms to keep it solvent.

Five day Google market summary for Maxar Technologies stock prices on the Toronto Stock Exchange (TSE) as per 4pm EST on November 1st, 2018. As outlined in the November 1st, 2018 Wall Street Investor post, "Maxar Technologies Ltd. (MAXR) could lead to an upward move," the stock has lost 76% of its value so far this year and approximately 45% over the last week. Graph c/o Google.

On the other hand, the #DontLetGoCanada space advocacy coalition might soon need to attract a new anchor advocate to lead the charge for increased funding for Canada's space industry. Maybe the Canadian based offices of Toulouse, France based Airbus will sign on. Airbus is certainly looking to increase its domestic corporate footprint and might even decide to be not quite so overtly self-serving with its recommendations.

Be that as it may, those are potential consequences of a story still playing out in the investor press. The core of the story is far, far simpler.

Maxar Technologies share prices have collapsed because, as outlined in the October 31st, 2018 Maxar press release, "Maxar Technologies reports third quarter 2018 results, declares quarterly dividend," the company missed its quarterly earnings forecast, by a large amount and included a massive writedown of assets, which wasn't expected.

Maxar CEO Howard Lance. Photo c/o Speakerpedia.
As outlined in the press release, Maxar reported:
  • Consolidated revenues of $508.2Mln US ($665.07Mln CDN). 
  • The company was expected to report a far higher $560Mln US or $733Mln CDN in consolidated revenues. Consolidated revenues a convenient accounting shorthand "covering all revenue generated by a parent company and its majority-owned subsidiaries, after intercompany eliminations" according to Quora
In essence, Maxar didn't sell enough product. 
  • A net loss under International Financial Reporting Standards (IFRS) of $432.5Mln US ($566Mln CDN) including $383.6Mln US ($502Mln CDN) in impairment losses and inventory obsolescence. A net loss under IFRS of $7.31 US ($9.6 CDN) per share; net loss excluding impairment losses of $0.83 US ($1.1 CDN) per share.
  • The $383.6 Mln US net loss/ write-down was something no one was expecting. When combined with the shortfall in consolidated revenue, the news caused the Maxar stock price to plummet.
  • An adjusted earnings of $44.6Mln US ($58.4Mln CDN) and adjusted earnings per share of $0.75 US ($1 CDN). 
  • IFRS operating cash flow of $119.2Mln US ($156Mln CDN) with an adjusted operating cash flow of $91.9Mln US ($122.3Mln CDN) and adjusted free Cash flow of $29.2Mln US ($38.3Mln CDN). 

And the good news just continues. As outlined in the October 31st, 2018 Motley Fool post, "Why Maxar Technologies Stock Just Imploded -- Down 41%," Maxar told investors that:
it expects to end 2018 with a 6.5% decline in full-year revenues. Worse, management is forecasting total capital spending to exceed $300Mln US this year, potentially wiping out the company's predicted $300Mln US to $400Mln US in adjusted operating cash flow and putting Maxar's cash-flow statement in the red for the year.
Maxar almost immediately moved to respond to investors concerns. According to the October 31st, 2018 Space News post, "Maxar trying to sell GEO business as defective components compound troubles," one of the options on the table is to sell off the Palo Alto CA based SSL subsidiary formerly known as Space Systems Loral.

Independent analysts also moved to revise their assessments regarding the Maxar stock price, a reasonable thing to do since most considered the stock to be a good buy, according to the October 31st, 2018 Regina Post article, "Space systems company Maxar sees shares crater on earnings miss."

According to the post:
While its geostationary satellite manufacturing business has been lauded as an industry leader, Maxar’s orders have fallen every year for the past three years. GEO comsat orders declined to eight in 2017 from 15 in 2016. At one point, the company was averaging 20 or more per year.
In fact, the only analyst which seems to have a reasonable assessment of Maxar stock prospects is New York NY based Spruce Point Capital Management which, as outlined in the August 10th, 2018 post, "Maxar Technologies Might be Getting Paranoid," suggested earlier this year that Maxar stock was overpriced and Maxar's dividend was at risk.

As outlined in the October 9th, 2018 Maxar Technologies press release, "Maxar Technologies Advances Planned US Domestication," Maxar/ MDA is still moving forward with its plan to become completely US owned and operated and "expects to complete this process in January 2019, subject to security holder approval."

Henry Stewart is the pseudonym of a Toronto based aerospace writer. 

No comments:

Post a Comment

Support our Patreon Page