- The Washington Times - Monday, September 25, 2006

Shares of Orbital Sciences Corp. closed at a 52-week high last week as the space and defense contractor continued to bolster its relationship with NASA.

The Sterling, Va., company’s stock closed at $19.93 Thursday after a month of big contract wins, including a piece of the $3.9 billion Orion spacecraft upgrade in partnership with Bethesda contractor Lockheed Martin.

Orbital shares closed yesterday up 8 cents at $19.58 on the New York Stock Exchange.

Under the Orion deal, Orbital will provide the rockets that will launch the new crew-exploration vehicle into space. The company stands to gain $275 million over four years.

Steve J. Mather, an analyst with Sanders Morris Harris Inc. in Los Angeles, said Orbital “has been doing everything right for the last couple of years.”

Mr. Mather, who rates the stock as a “buy” and doesn’t own any shares, cited three reasons for the company’s steady performance.

“Their management team’s been in place for a long time — more than a decade — which is unusual,” he said. “Their bread-and butter-businesses, satellite production and missiles, are both particularly healthy.”

Lastly, Mr. Mather noted, “They are working hard to expand their Department of Defense business.”

In addition to the Orion contract, Orbital is providing launch capabilities to Rocketplane Kistler, the Oklahoma company that NASA selected to develop an unmanned cargo transportation system to ferry astronauts to the International Space Station. The deal is expected to provide Orbital with about $40 million next year and $80 million to $90 million in 2008, said Troy J. Lahr, an analyst with Stifel Nicolaus & Co. in Baltimore.

Both contracts represent the company’s focus on higher-margin business such as launch vehicles — as opposed to satellite technologies — as an increasing share of revenue.

“Previously, many investors complained that company sales growth was coming from lower-margin work,” Mr. Lahr said in a recent research note.

Although contracting can be a cyclical industry, Orbital’s highly specialized work makes it somewhat insulated, said Mr. Lahr, who has a “buy” rating on the stock.

“In a tightening budget environment, Orbital’s work on proven and needed missile-defense technologies should provide downside protection,” he said.

Stifel Nicolaus has an investment banking relationship with Orbital.

Earlier this month, Orbital announced that it had successfully launched its ground-based interceptor missile for the fifth consecutive time as part of a missile-defense system. The company provides the missile for Boeing Co., which is contracted by the U.S. Missile Defense Agency.

Still, even mission-critical projects are not immune from headline risk, Mr. Mather cautioned.

“No matter where we are in the cycle of military spending, you can always raise that flag,” he said. “You could raise it today, you could raise it yesterday and you can raise it tomorrow.”

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