ViaSat (VSAT) Blasts Off on Stellar Fourth Quarter Earnings
Shares of satellite and wireless networking company ViaSat (VSAT) soared nearly 20% last Friday, after the company reported strong fourth quarter earnings that topped all analyst expectations. During the quarter, ViaSat posted adjusted earnings of $0.19 per share, a reversal of the $0.01 loss it reported in the prior year quarter. The company's revenue also surged 28% to $308.7 million, and announced that it had acquired $227.1 million in new contracts.
Wall Street had expected ViaSat to earn $0.02 per share on revenue of $286.7 million. Daily Chart
ViaSat's gain is particularly surprising due to its heavy dependence on government contracts, which comprise nearly half of its top line. With heavy exposure to the U.S. and European governments - both of which are scaling back on expenses - ViaSat is extremely vulnerable to additional budget cuts. However, considering that the sequester in the United States and ongoing austerity measures in Europe were in effect during the quarter, it appears that ViaSat is relatively immune to these fluctuations, since satellite and wireless technology is a core need for governments to continue functioning. Yet this heavy dependence on the public sector doesn't mean that it is a slouch in the private one. ViaSat recently partnered with Boeing (BA
) to build a new geostationary orbiter, a next generation satellite which far exceeds the capabilities of its recently launched ViaSat-1, which already has an industry high capacity of 140 Gbps. ViaSat and Boeing have stated that they will co-design and produce the new satellite, named ViaSat-2, which is expected to be launched into high-Earth orbit by mid-2016. ViaSat 2 will channel its Exede broadband service to more rural areas of the United States, such as the Western Great Plains and Rocky Mountains, which are currently unreachable from ViaSat-1. Both ViaSat-1 and Viasat-2 also provide Internet access to JetBlue (JBLU
) aircraft, which suggests that ViaSat will generate even more revenue as other airlines upgrade their Internet systems. However, by teaming up with Boeing, ViaSat is switching suppliers from Space Systems/Loral, which helped manufacture ViaSat-1. ViaSat and Space Systems/Loral ended their relationship on a sour note, after the former accused the latter of intellectual property violations when it built a competing satellite for Hughes Network Systems. The satellite that was eventually developed for Hughes became EchoStar 17, which has a lower capacity than ViaSat-1 but nonetheless offers comparable speeds. Hughes' Gen4 broadband service offers 10-15 Mbps service to customers, while ViaSat's Exede comes in at approximately 12 Mbps. Although ViaSat's growth potential is encouraging, the stock has already risen more than 50% over the past twelve months, bumping up its forward P/E ratio
to 31.6, considerably higher than the industry average of 8.1. Being a typical growth stock, however, the importance of fundamentals are currently being put on hold as investors attempt to digest its prospects for future growth, which look fairly robust given the world's constant demand for faster Internet connectivity. Other News About VSAT ViaSat Management Discusses Q4 2013 Results
ViaSat offers an optimistic view of the road ahead. New contracts return ViaSat to profit in 4Q
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Published on May 23, 2013
By Leo Sun