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Viasat's Latest Satellite Gears up for Military Applications

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Viasat Inc. (VSAT - Free Report) is offering its satellite communications service based on ViaSat-2 — the world’s most advanced communications satellite — for government, defense and military applications. The service also includes innovative ground networking technologies, with significant performance advantages over any other commercial or U.S. Department of Defense (DoD) SATCOM system.

Earlier this month, Viasat conducted a ViaSat-2 SATCOM system demonstration for the U.S. armed forces, where the satellite system demonstrated the industry's fastest broadband connections, exceeding 100 Mbps.

Emerging U.S. government needs call for bandwidth-intensive, cloud-connected military applications and the innovations in the new ViaSat-2 satellite and network can dramatically improve operational capabilities for military missions, ensuring superior reach, promptness, and resiliency for global military forces.

ViaSat-2 is a $625-million high-capacity satellite launched by the company in June 2017. Viasat’s latest satcom network is powered with greater bandwidth and higher resilience, redundancy and active cyber protection. This will maximize operational performance in the conflicted environments that military operations face during combat.

ViaSat-2 is expected to have twice the bandwidth and seven times more broadband coverage over ViaSat-1. Some other features which make it more powerful than ViaSat-1 include high-capacity connectivity, smaller gateway antenna and twice as many gateways.

Viasat is already building its next-generation high-capacity satellite system — ViaSat-3 — which is likely to expand its network worldwide.

The satellite business is a burgeoning space and is one of the fastest growing segments of the $350-billion space industry. Significant demand for higher speeds of broadband connectivity in residential, in-flight and government markets are likely to boost Viasat’s momentum in the near term. Viasat’s shares have returned 23.2% in the past six months, outperforming the industry’s rally of 18.1%.

In recent quarters, Viasat’s earnings have suffered due to R&D expenses. The primary dampeners are the ViaSat-3 payload, pre-flight development and testing, commercial in-flight connectivity, STCs as well as line-fit activity. This indicates that we can expect more pressure on profits in the upcoming quarters.

Further, the costs related to the ViaSat-2 service launch activities and preparations for the large-scale in-flight Wi-Fi ramp are expected to dent the bottom line in the upcoming quarters. The company anticipates heavier advertising activity over the next several quarters, which will raise costs and hurt margins.

Zacks Rank & Stocks to Consider

Viasat carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the same space include HP Inc. (HPQ - Free Report) , Motorola Solutions, Inc. (MSI - Free Report) and Harris Corporation , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HP Inc. has a decent earnings surprise history. The company delivered an average positive surprise of 4.8% over the trailing four quarters, beating estimates thrice.

Motorola Solutions has a decent earnings surprise history for the preceding four quarters, beating estimates each time, with an average positive surprise of 11.8%.

With four back-to-back earnings beats, Harris Corporation has average positive surprise of 6.7%.

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