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ViaSat Clinches MIDS JTRS Terminal Contracts Worth $88.3M

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ViaSat Inc. (VSAT - Free Report) recently clinched Lot 5 and Lot 5a contracts worth $88.3 million from the U.S. Navy Space and Naval Warfare Systems Command. This follows a Lockheed Martin Corporation (LMT - Free Report) contract which ViaSat secured recently, per which the latter will deliver L-band data link communications technology for the integration and testing phase of the U.S. Navy‘s Long Range Anti-Ship Missile program.

Under the latest contracts, ViaSat will provide Multifunctional Information Distribution System (MIDS) Joint Tactical Radio System (JTRS) terminals to the U.S. Navy and Air Force. MIDS JTRS enables communication by voice, video and data with a line-of-sight, jam-resistant capability across ground, air and naval assets, thus improving battlefield communications for joint and coalition warfighters.Work is scheduled to be completed by Jun 2019 and will be performed in Carlsbad, Calif., and Tempe, Ariz.

ViaSat is a leading provider of state-of-the-art Link 16 airborne networking systems and the largest provider of MIDS JTRS terminals to the U.S. Military. These current awards mark a sizeable increase in terminal orders and deliveries as the U.S. Navy and Air Force fourth generation fighterspursue a full transition to the MIDS JTRS technology.

Despite its robust business, the company’s shares have had a dismal run on the bourse. Over the last one year, the company’s shares have lost 1%, against the Zacks categorized Wireless Equipment industry’s average gain of 13.9%. The company’s earnings estimates have also moved south over the last couple of months, indicating bearish analyst sentiment.

The Zacks Consensus Estimate for fiscal 2018 has widened from a loss of 33 cents a month ago to a loss of 41 cents today, driven by one downward estimate revision. Over the last few quarters, ViaSat’s Research and Development costs in relation to its satellite launches and other developments have been increasing alarmingly. Further, the company expects R&D expenses in the Commercial Networks segment to rise in the coming two quarters on ViaSat-3 payloads, which will likely exert significant pressure on EBITDA. Presumably, investors are worried over the effect of these factors on the company’s bottom line, in the short term.

Also, the fact remains that ViaSat has significant exposure to the U.S. federal firms, and is prone to various factors like the timing of contract wins and product deliveries. The company’s satellite services segment is also highly affected by seasonality of demand due to traditional retail selling periods.

Due to these factors, the stock currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

Some better-ranked stocks in the broader sector include Ubiquiti Networks, Inc. and Sierra Wireless, Inc. , both holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ubiquiti Networks has a solid earnings surprise history for the trailing four quarters, having beaten estimates thrice with an average beat of 13.3%.

Sierra Wireless has beaten estimates impressively thrice over the trailing four quarters, with an average positive surprise of 155.9%.

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