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Barron's: Trump's Space Force to Boost These 5 Stocks

Barron's: Trump's Space Force to Boost These 5 Stocks
Chief Master Sgt. Roger Trowberman, near right, unfurls the new Space Force Flag in a White House ceremony May 15, 2020, with Chief of Space Operations Gen. Jay Raymond, near left, flanked by President Trump, far right, and Air Force Secretary Barbara Barrett, far left. (Alex Brandon/AP)

By    |   Tuesday, 19 May 2020 09:20 AM

Spending on space is rising in the wake of President Donald Trump’s Space Force military branch, which analysts say is good for several stocks.

Last December, Trump signed into law a measure to create the Space Force, saying the U.S. needed to expand its military presence in space. The Air Force previously oversaw offensive and defensive operations in space.

The Pentagon’s budget allocated funding for the force, including “space-related weapons systems and operations.” The Space Force’s procurement budget is projected to reach $4.7 billion by fiscal year 2025.

NASA’s fiscal year 2021 budget, for instance, is about $25 billion, up 12% year over year. Space Force asked Congress for $15 billion in its first budget request, Barron’s reported.

Meanwhile, aerospace giant Boeing (BA) launched an X-37B autonomous space plane that can return to earth. The spacecraft took off on a United Launch Alliance, or ULA, Atlas V rocket. ULA is a joint venture between Boeing and Lockheed Martin (LMT).

“The X-37B has shifted the paradigm and redefined efficiency in space development,” said Jim Chilton, Boeing Space and Launch senior vice president, in the company’s news release. “The rapid technology advancements enabled by the program will benefit the entire space community and influence the next generation of spacecraft design.”

The X-37B is designed to return to earth, like the now-retired space shuttle. The Atlas V rockets, however, are for single use only, Barron’s said.

Aerojet Rocketdyne (AJRD), Avio (AVIO.Italy) and Northrop Grumman (NOC) are three other “space stocks” investors can follow.

However, Barron’s cautioned that “investing in space isn’t easy.”

Space “is only a subset of defense contractors’ overall businesses. Boeing’s defense business—back in 2018, before the dual problems of Covid-19 and the 737 MAX—accounted for about 26% of total Boeing sales. Space was a smaller portion with the defense segment,” Barron’s said.

“Aerojet and Avio appear to be the purest play publicly traded rocket companies. Aerojet trades for about 21 times estimated 2021 earnings. Avio trades for about 14 times estimated 2021 earnings. Aerojet sales are expected to grow about 4% a year on average for the next couple of years. The comparable figure for Avio is 11%. Avio is a smaller company that Aerojet” Barron’s said.

Many other rocket companies are privately held, Barron’s said.

For its part, Boeing last month raised $25 billion in a bond offering, a blowout result for the planemaker, which it said helped the company avoid taking government aid during the coronavirus-induced travel downturn.

Boeing's capital raise, first reported by Reuters, is the sixth-largest investment-grade bond offering of all time and the biggest year-to-date, according to Refinitiv data. The Federal Reserve's intervention in the credit market has boosted prospects for troubled borrowers such as Boeing.

The planemaker has been trying to bring its 737 MAX jet back into service after two fatal crashes, while the coronavirus pandemic has hammered aviation and other industries. Business shutdowns around the world to curb the outbreak have dried up demand for air travel.

Trump has repeatedly vowed to provide financial assistance to Boeing. The company in March had said it backed $60 billion in government loans and loan guarantees for the entire aviation industry and its chief financial officer had warned the "markets essentially" were closed to Boeing.

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Spending on space is rising in the wake of President Donald Trump’s Space Force military branch, which analysts say is good for several stocks.
space, stocks, space force, aerospace
Tuesday, 19 May 2020 09:20 AM
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