ViaSat (VSAT) To Provide STT For Apache Guardian Helicopters

ViaSat, Inc. (NASDAQ:VSAT) recently announced that it has clinched a multi-year deal from premium aircraft manufacturing behemoth, The Boeing Company (NYSE:BA) , to supply Small Tactical Terminals ("STT") that are used in AH-64E Apache (NYSE:APA) Guardian helicopters. The deal is the latest in the string of STT contracts secured by the broadband services and technology provider over the past few months. This has led ViaSat to commence a pre-planned production ramp-up to meet surging demand.

Per the deal, ViaSat will produce a special two-channel STT called KOR-24A Link 16. A minimum of 534 terminals will be produced over the next four years and can be eventually extended to contain more options. Touted as the one of the most advanced multi-role combat helicopter, AH-64E Apache is extensively used by the U.S. Army and international defense forces.

ViaSat’s STT will offer Link 16 and Soldier Radio Waveform capability for the Apache helicopters, which would improve situational awareness and enhance the aircraft’s communications with the ground maneuver forces. The company informs that the STT has been developed in a cost-effective manner, highlighting the strength of its “commercial model for government use”, a staple profit churner for the government business.

The company has been undertaking sizable investments to expand its STT production based on demand projections. Presently, it has 600 terminals already in the field, with plans to cross the 1,000th mark by early 2018. ViaSat foresees increasing war fighting requirements in the future. It believes that its commercial model will help it grab a greater market share, thus offering a competitive edge over peers. The company has plans to roll out additional capabilities to enhance the STT portfolio.

Despite its resilient government business, the company’s shares have had a dismal run on the bourse. Over the course of the last one year, the company’s shares have lost 3.9% against the Zacks categorized Wireless Equipment industry’s average gain of 8.8%. In fact, the company’s earnings estimates moved south over the last month, 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. This has put the company’s EBITDA under pressure.

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. This Zacks Rank #4 (Sell) company’s satellite services segment is also highly affected by seasonality of demand due to traditional retail selling periods. These factors are expected to thwart growth, at least in the short term.

Stocks to Consider

Some better-ranked stocks include Ubiquiti Networks, Inc. (NASDAQ:UBNT) and Sierra Wireless, Inc. (NASDAQ: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 impressively beaten estimates thrice over the trailing four quarters, with an average positive surprise of 155.9%.

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