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ViaSat Tapped by Lockheed to Provide LRASM Weapon Data Links

ViaSat Inc. VSAT recently secured a follow-on contract with Lockheed Martin Corporation LMT, per which the former 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. The value of the contract has been kept under wraps.

The Long Range Anti-Ship Missile (LRASM) program has been designed to help defend against adversarial warships, and is an important part of the U.S. Navy’s Offensive Anti-Surface Warfare project.The ViaSat datalink solutions will facilitate the LRASM weapon system to communicate with launch platforms.

The contract corroborates ViaSat’snext-generation technology from its Battlefield Awareness and Targeting System product line. The datalink units actually offer highly developed communications capabilities and superior performance, along with a drastically reduced form factor with minimal development expense to its clients.

The company also plans to launch the LRASM platform in the market over the next 12–18 months.

Earlier this month, ViaSat successfully rolled out its ViaSat-2 satellite, which is touted to have twice the bandwidth and seven times more broadband coverage than ViaSat-1. The satellite is set to improve broadband service and reach for Central America/the Caribbean, North America, part of northern South America, and primary aeronautical/maritime routes in the Atlantic.

However, ViaSat’s shares have had a dismal run on the bourse. Over the course of the last one year, the company’s shares have lost 2.6%, in contrast to the Zacks categorized Wireless Equipment industry’s average gain of 10.4%.

The fact remains that ViaSat has significant exposure to the U.S. federal firms, and thus 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. Additionally, soaring research and development expenses continue to be headwinds for the company.

The last reported quarter saw ViaSat’s R&D expenses rise a whopping 84.4% year over year, which dampened earnings growth. 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.

ViaSat, Inc. Price and Consensus

In fact, the company’s earnings estimates moved south over the past month, which indicates 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.

In light of these factors, we currently have a Zacks Rank #4 (Sell) on the company.

Stocks to Consider

Some better-ranked stocks include Ubiquiti Networks, Inc. UBNT and Sierra Wireless, Inc. SWIR, 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, for 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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