Orbital share price defies a falling market

The Orbital share price rose 11.11% on a day when the ASX 200 fell by 14 points. This was after the company announced FY20 revenue and NPAT.

| More on:
flying asx share price represented by man flying remote control drone

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

On a day when the S&P/ASX 200 (INDEXASX: XJO) fell by 14 points, the Orbital Corporation Ltd. (ASX: OEC) share price rose by 11.11%. Orbital is a Perth based defence contractor. In addition, it is the world leader in the design and manufacture of propulsion systems and flight critical components for tactical unmanned aerial vehicles (UAVs).

The company recently saw its share price rise by 19% after a visit from the Minister for Defence, the Hon Linda Reynolds. Moreover, this visit was two weeks after the launch of the Australian Government's 2020 Defence Strategic Update and 2020 Force Structure Plan. This plan includes potential investment of up to $700 million in tactical UAVs over the next decade. As well as up to $1.3 billion in Maritime Uncrewed Aerial Systems between 2020 and 2040.

What moved the Orbital share price?

The Company yesterday announced it had achieved revenue of $33.8 million. This is an improvement of 121% on the FY19 revenue of $15.3 million. The figure is at the top end of the company's market guidance range of $25 million to $35 million.

FY20 revenue grew due to the company's agreement with Insitu Inc., a wholly owned subsidiary of the Boeing Company. In fact, it now has two engine models in continuous production for Insitu. The third of the five engine models is scheduled for production in 2021. Delivering on Insitu commitments remains the company's highest priority. In addition, it is the most immediate opportunity to grow revenue in FY21.

Orbital UAV's customer demand remains strong and existing business and projected outlook has not been affected by the coronavirus pandemic. In addition, the company has implemented a comprehensive response and production capacity remains robust.

Management commentary

Todd Alder, the company's CEO and Managing Director said "Orbital UAV's excellent progress against our strategic objectives during FY20 is reflected in our strong financial performance. Delivering revenue at the top end of guidance, in spite of the COVID-19 environment, is testament to the commitment of our people and our ability to effectively manage our global supply chain."

In March 2020, the company signed a new MoU with one of Singapore's largest defence companies. This was for the design, development and initial production of a multi-fuel UAV engine. In April 2020, it announced a new contract with leading aerospace company Northrop Grumman. This was to develop a hybrid propulsion system for a Vertical Take-Off and Landing UAV.

"The two new engine development contracts announced earlier this year demonstrate Orbital UAV's growing reputation as a world leading engine manufacturer in the global tactical UAV market." said Mr Alder. "We will progress these exciting engineering development projects in FY21 while continuing to focus on our production priorities under the Insitu [agreement]," he said.

Share price performance

The Orbital share price is up by 268.4% in year to date trading. It has a market capitalisation of $108.62 million and currently pays no dividends. The company provided guidance for revenue for FY21 of between $40 million and $50 million.

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Orbital Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Young girl drinking milk showing off muscles.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a great end to the trading week for ASX investors today.

Read more »

Hands reaching high for a trophy with a sunset in the background.
Record Highs

The ASX 200 Index is on its way to another all-time high today. Here's why

These blue chip stocks are driving the index towards a new record today...

Read more »

Group of friends trading stocks on their phones. symbolising the 3 most traded ASX 200 shares today
Share Market News

3 ASX mining stocks topping the most-traded list in October

Chinese stimulus news and company announcements likely contributed to the higher trading activity.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Share Gainers

3 ASX 200 stocks smashing the benchmark this week

These three ASX 200 stocks are leading the charge this week. Here’s how.

Read more »

Two people tired and resting after sports race.
Broker Notes

Fundie rates 2 ASX 200 stocks in short-term pain but with long-term gain potential

Blackwattle Investment Partners sees these 2 ASX 200 stocks as worthy of a buy and hold strategy.

Read more »

A young woman holding her phone smiles broadly and looks excited, after receiving good news.
Share Gainers

Why A2 Milk, EOS, GQG, and Mineral Resources shares are racing higher today

These shares are ending the week strongly. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Megaport, Pilbara Minerals, Vysarn, and WiseTech shares are falling today

These shares are ending the week in the red. But why?

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »