By Philip van Doorn
Virgin Galactic leads the list, but Boeing and Airbus are also among companies expected to increase revenue much more quickly than the S&P 500.
It may seem that Elon Musk owns the space business, with SpaceX's current monopoly on flying U.S. astronauts into orbit and its near-dominance of the satellite launch industry.
But SpaceX is privately held, which means most investors cannot ride along with its success. If you believe in the revolutionary potential of various space-related industries, you will need to look elsewhere.
Background:SpaceX vs. Boeing: two titans of aerospace are locked in an astronomical dogfight
Any large aerospace contractor has dozens (or hundreds) of suppliers. And the aerospace industry is lumped in with other defense contractors in the investing world. Then there are companies tied to the space or defense industries in other areas, such as computer and software development. So below is a screen of (mostly) aerospace and defense stocks to see which companies are expected to increase revenue most rapidly through 2025, using calendar 2023 as a baseline.
A focus on expected sales growth can help you begin your own research if you wish to hold individual stocks in this space.
To develop a list of stocks to screen, we looked at the holdings of five exchange-traded funds that hold shares aerospace and defense companies:
Altogether, these funds hold 84 stocks.
For our screen on expected revenue growth, we narrowed the list to 68 companies covered by at least five analysts polled by FactSet. Then we looked at consensus estimates for calendar years, because many companies have fiscal years that don't match the calendar. The list was cut further to 63 companies for which consensus sales estimates are available through calendar 2025.
We sorted the list by expected two-year compound annual growth rates (CAGR) for sales. To put the numbers in some perspective, the S&P 500's sales per share are expected by analysts to increase at a weighted CAGR of 5.1% from 2023 through 2025.
Here are the 20 companies held by at least one of the five aerospace and defense ETFs with the highest expected sales CAGR from 2023 through 2025. Even the slowest expected revenue growth pace on the list is more than twice the expected pace of the U.S. benchmark index, and the list includes both Boeing and Airbus. The consensus annual sales estimates are in millions of dollars.
Company Ticker Two-year estimated sales CAGR through 2025 Est. 2023 sales Est. 2024 sales Est. 2025 sales Held by Virgin Galactic Holdings Inc. SPCE 178.9% $6 $24 $47 ITA Rocket Lab USA Inc. RKLB 46.5% $291 $430 $623 ITA Planet Labs PBC Class A PL 24.5% $219 $266 $340 PPA Markforged Holding Corp. MKFG 23.4% $107 $124 $162 ARKX Unity Software Inc. U 20.1% $2,181 $2,609 $3,148 ARKX Teradyne Inc. TER 19.9% $2,680 $3,267 $3,852 ARKX Axon Enterprise Inc. AXON 19.8% $1,526 $1,825 $2,189 ITA, PPA, XAR Palantir Technologies Inc. Class A PLTR 18.8% $2,214 $2,614 $3,124 PPA Spirit AeroSystems Holdings Inc. Class A SPR 18.6% $6,093 $7,473 $8,565 ITA, PPA, XAR, ARKX, MISL Blade Air Mobility Inc. Class A BLDE 18.5% $230 $272 $323 ARKX UiPath Inc. Class A 18.3% $1,257 $1,499 $1,758 ARKX KBR Inc. KBR 18.0% $7,050 $8,324 $9,821 PPA, MISL Heico Corp. HEI 15.2% $2,988 $3,620 $3,968 ITA, PPA, XAR, ARKX, MISL ViaSat Inc. VSAT 14.2% $3,737 $4,409 $4,873 PPA Airbus SE FR:AIR 12.8% $68,906 $77,250 $87,613 ARKX Synopsys Inc. SNPS 12.7% $5,949 $6,705 $7,553 ARKX Boeing Co. BA 12.5% $78,720 $90,743 $99,663 ITA, PPA, XAR, MISL AeroVironment Inc. AVAV 12.2% $630 $730 $793 ITA, PPA, XAR, ARKX, MISL Amazon.com Inc. AMZN 12.1% $569,929 $639,279 $715,819 ARKX JD Logistics Inc. HK:2618 11.9% $22,841 $25,694 $28,580 ARKX Source: FactSet
All of these companies are based in the U.S., except for Airbus, which is headquartered in the Netherlands and JD Logistics Inc. , which is based in Beijing.
Click on the tickers for more about each ETF, company or index.
Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page
If you look at the quote pages, you will see high forward price-to-earnings ratios for many of these companies. In some cases, there is no forward P/E ratio because earnings over the next 12 months are expected to be negative.
Virgin Galactic Holdings Inc. (SPCE) tops the list with the highest expected sales growth pace because it made its first commercial space flight in June, and is ramping up launch activity. But the company is expected by analysts to post annual net losses through 2027 at least.
For this type of company, sales growth can drive a stock price. Then again, experimental technology could lead to delays and disappointment, which helps explain why a five-year chart for Virgin Glactic's stock is so painful to look at. Here's is the five-year total return, compared with those of the S&P 500 and QQQ:
Maybe the years of disappointment for Virgin Galactic are coming to an end, but investors haven't jumped back aboard, despite the company's success in 2023.
Leaving the list in the same order, here's a summary of analysts' opinions of the stocks. The industry standard is for analysts to set one-year price targets. That may be too short for a long-term speculative investment.
Company Ticker Share "buy" ratings Share neutral ratings Share "sell" ratings Sept. 11 price Cons. price target Implied 12-month upside potential Virgin Galactic Holdings Inc. SPCE 17% 50% 33% $2.06 $4.39 113% Rocket Lab USA Inc. RKLB 78% 22% 0% $6.04 $9.83 63% Planet Labs PBC Class A PL 91% 9% 0% $2.84 $5.44 91% Markforged Holding Corp. MKFG 80% 20% 0% $1.28 $2.34 83% Unity Software Inc. U 61% 28% 11% $38.02 $46.67 23% Teradyne Inc. TER 50% 40% 10% $98.90 $122.67 24% Axon Enterprise Inc. AXON 92% 8% 0% $213.19 $237.36 11% Palantir Technologies Inc. Class A PLTR 17% 33% 50% $15.79 $13.73 -13% Spirit AeroSystems Holdings Inc. Class A SPR 25% 62% 13% $17.84 $26.71 50% Blade Air Mobility Inc. Class A BLDE 100% 0% 0% $3.14 $7.75 147% UiPath Inc. Class A PATH 43% 57% 0% $19.18 $19.69 3% KBR Inc. KBR 92% 8% 0% $59.79 $74.27 24%
(MORE TO FOLLOW) Dow Jones Newswires
September 16, 2023 09:13 ET (13:13 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.