SpaceX, Blue Origin rivalry enriches old-school manufacturers
Bloomberg January 24, 2024
As private space firms like Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin step up rocket production and development and more nations race to the moon, midsize manufacturers that provide their equipment and supplies are reaping the benefits.
Satellite builder MDA Ltd, heat-transfer manufacturer Graham Corp and aluminum maker Constellium SE all saw share gains of two-thirds or more last year, driven in part by the billions of dollars in private and government funding for space exploration and the creation of large-scale satellite networks.
The global space economy, which reached $546 billion in 2022 according to the Space Foundation, is projected to climb 41% over the next five years. The organization also found that commercial launches in 2023 grew by 50% over the previous year.
Many established manufacturers have welcomed the new sales opportunities.
Chris Quilty, co-chief executive officer of analytics firm Quilty Space, calls this “the SpaceX coattail,” and sees more companies citing space as a growth sector in their pitch decks.
“The industry is seeing incredible growth in the number of launches, the number of satellites on orbit, the number of newly funded businesses and the amount of venture capital that has poured into the industry,” he said in an interview.
The first flight of United Launch Alliance’s heavy-lift Vulcan booster earlier this month, and its growing list of booked spaceflights, illustrates the booming demand for orbital transportation.
“Anytime there’s a successful launch of a new rocket, that’s a good milestone,” Mike Greenley, chief executive officer of Ontario, Canada-based MDA, said in an interview.
MDA’s stock price rose by 80% last year as it booked a number of headline contracts, including a $1.6 billion deal to design and build Telesat Corp’s Lightspeed satellite network, which aims to bring high speed internet to remote regions.
Greenley said the total space market could reach $1 trillion in the coming decade, and called this a “conservative figure.”
Oil refining and military manufacturer Graham Corp. got into the space business with its 2021 acquisition of turbo pump maker Barber-Nichols Inc. Batavia, New York-based Graham, which saw its stock nearly double in 2023, sees more diversification opportunities in space. For analyst Theodore O’Neill, co-founder of Litchfield Hills Research, it also represents steady revenues.
“Space is one of these businesses where once you’re accepted, it’s your business to lose,” he said in an interview. “You’ll never get fired for buying an IBM computer.”
Paris-based Constellium’s shares rose 69% last year. The aluminum manufacturer, which says its space business is small, but expanding, provides plates and sheets for Blue Origin’s New Glenn orbital rocket. A company representative said aluminum sales growth, driven by the aerospace market, could increase 11% by 2027.
‘Bigger piece of the pie’
UK based Hunting Plc, which can trace its origins back 150 years and is principally known as a supplier to oil companies, decided to move into the space sector two years ago. It now provides parts for the landing legs of SpaceX rockets and fuel storage for Blue Origin.
“It’s currently a small but interesting part of our group,” Hunting CEO Jim Johnson said in an interview. “We are now looking to get a bigger piece of the pie.”
Growth often leads to merger activity and both Johnson and MDA’s Greenley are open to opportunities, with the former noting the company is “always looking” as part of its long-term strategy.
“We’ve got a good track record with M&A so if it’s value accretive and strategically complementary then it’s certainly something we would consider,” Johnson said.
While noting that no industry is immune to recession, Greenley said that space business applications and geopolitical rivalries between nations trying to establish a presence on the moon creates a unique investment opportunity for “persistent, and high growth” for the foreseeable future.
“It’s not 50 years ago, where you go to the moon and you stop paying attention for a while,” Greenley said. “It’s driven by commercial economic opportunity in things like space-based communication, earth observations and space-based manufacturing.”
With assistance from Aashna Shah and Loren Grush.