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Zacks Industry Outlook Highlights: LSXMK, IRDM, and SATS

·9-min read

For Immediate Release

Chicago, IL – November 16, 2021 – Today, Zacks Equity Research discusses The Liberty SiriusXM Group LSXMK, Iridium Communications Inc. IRDM and EchoStar Corp. SATS.

Industry: Satellite & Communications


Companies in the Zacks Satellite and Communication industry are benefiting from a wide proliferation and cheaper access to space technology, which lead to a diversification in end-market users. Artificial Intelligence, Machine Learning, and Big Data have given rise to multiple use cases across industries like oil and gas, agriculture, transportation, and non-governmental organizations. Geopolitical competition in space as a contested domain is leading to further investments by global militaries.

The Liberty SiriusXM Group, Iridium Communications Inc. and EchoStar Corp. have significant growth potential on global security threats, surging defense budgets, demand for high-quality imagery, and value-added services.

Industry Description

The Zacks Satellite and Communication industry comprises space technology companies that provide satellite imagery and intelligence services along with spacecraft and robotics for space exploration, research, and national security. They help customers understand and better navigate the evolving planet, deliver global broadband communications, and explore space.

The industry players deliver communication services to media businesses, fixed and wireless telecommunications operators, data networking providers, and Internet service providers. They provide commercial satellite communication services to government and military organizations. The firms offer satellite-based consulting and technical services that include the lifecycle of satellite operations along with infrastructure ranging from satellite and launch vehicle procurement to telemetry and commanding services.

What's Shaping the Future of Satellite and Communication Industry

Advancements in Technology Hold the Key: There has been a radical change in highly specialized satellite manufacturing patterns. More emphasis is put on the use of common buses and computer-aided design tools to customize the communications payloads. A mass-produced system is adopted and several satellites are manufactured at once in an assembly line. Integration and testing have become highly automated.

The extent of testing is reduced after prototyping and initial production is completed. Countries with comprehensive space programs have distinct military, economic, and scientific advantages but complexity and barriers to entry into space have allowed only a few to develop notable capabilities.

The demand for small satellites across regions is expected to increase over time, with North America having the bulk of the market share followed by the Asia Pacific, Europe, and the rest of the world. North America continues to maintain its dominance with the highest number of small satellite launches by government end users. The companies continue to align their products and services with the U.S. Department of Defense’s National Defense Strategy needs, as well as growing international defense and intelligence demand.

Subscriber Momentum to Drive Growth: Wide proliferation and cheaper access to space technology have led to a diversification in end-market users. The companies share a strategic relationship with various government organizations, including military and disaster response agencies and non-governmental organizations to provide robust, tactical, real-time voice and low-latency data command, and control communications. A wide product portfolio allows the companies to expand their customer base and offset the losses from one product category with benefits obtained from another.

Also, high product quality increases brand loyalty and improves their performance in a competitive market. For civil customers, particularly NASA, growth is being driven by space exploration programs. For commercial customers, drivers of growth include a strong demand for imagery due to new use cases, space-based remote sensing, Geosynchronous Equatorial Orbit replacement demand, and Low Earth Orbit communications programs.

Increasing Spending on Space Infrastructure: With more than half of the revenues coming from U.S. government customers, the industry is likely to benefit from increasing defense and space infrastructure budgets. The proliferation of space-based intelligence, surveillance and reconnaissance and communications is expected to boost government investments in the sector.

The companies are developing differentiated capabilities that are designed for future space exploration, including propulsion, power, and robotics. These elements will be critical for helping their customers in achieving successful space exploration missions. Focus on research and development and product and service enhancements is a key strategy for innovation and growth.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Satellite and Communication industry is housed within the broader Zacks Computer and Technology sector. It currently has a Zacks Industry Rank #71, which places it at the top 28% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is an outcome of a positive earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential. Over the past year, the industry’s earnings estimates for the current year and the next have increased 27.3% and 12%, respectively.

Before we present a few satellite and communication stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture.

Industry Underperforms Sector, S&P 500

The Zacks Satellite and Communication industry has underperformed both the broader Zacks Computer and Technology sector and the S&P 500 composite in the past year.

The industry has returned 29.4% over this period compared with the S&P 500’s rise of 30.6%. The broader sector has gained 36.2%.

Industry's Current Valuation

The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing satellite and communication stocks. The industry has a trailing 12-month EV/EBITDA of 12.65X compared with the S&P 500’s 15.59X. It is also below the sector’s trailing 12-month EV/EBITDA of 16.34X.

Over the past five years, the industry has traded as high as 17.96X, as low as 7.52X with a median of 11.61X.

3 Satellite and Communication Stocks to Watch

The Liberty SiriusXM Group: Headquartered in Englewood, CO, The Liberty SiriusXM Group is a subsidiary of Liberty Media Corporation. The company, through its subsidiaries, engages in the entertainment business in the United States and Canada. It offers connected vehicle services; and Travel Link, a suite of data services that include graphical weather, fuel prices, and sports schedules and scores. The Liberty SiriusXM Group also provides ad-supported radio services; Pandora Plus, a radio subscription service; and Pandora Premium, an on-demand subscription service.

The Zacks Consensus Estimate for its current-year earnings has been revised 87.6% upward over the past 30 days. The company delivered a trailing four-quarter earnings surprise of 58.9%, on average. The stock has gained 28.5% in the past year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Iridium Communications: Headquartered in McLean, VA, Iridium Communications provides mobile voice and data communication services, and products to businesses, the United States and foreign governments, non-governmental organizations, and consumers. The company delivers mission-critical services across a broad range of industries, which has allowed its business to remain resilient despite headwinds.

Iridium offers competitive broadband services through its Certus technology. It expects to continue benefiting from a recurring service revenue base, driven by subscriber growth and mobile penetration. The company recently announced that its Iridium Certus 100 "midband" service is commercially available for maritime, land mobile, IoT, aviation, and government customers.

Iridium Communications carries a Zacks Rank #3 (Hold). The consensus estimate for its current-year earnings has been revised 20% upward over the past 30 days. The company delivered a trailing four-quarter earnings surprise of 45.6%, on average.

EchoStar Corp.: Headquartered in Englewood, CO, EchoStar, together with its subsidiaries, provides broadband satellite technologies and broadband Internet services. It operates through its Hughes Network Systems and EchoStar Satellite Services business segments.

The company is managing all areas of the business prudently for growth in revenues and net income. It has announced agreements with OneWeb, a global communications company, to provide satellite connectivity solutions in the United States and India.

EchoStar carries a Zacks Rank #2 (Buy). The consensus estimate for its current-year earnings has been revised 3.4% upward over the past seven days. The stock has returned 12.8% in the past year. The company delivered a trailing four-quarter earnings surprise of 90%, on average.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit information about the performance numbers displayed in this press release.

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