September 28, 2015 / 9:45 PM / 4 years ago

Aerojet shares drop further 4 pct after U.S. contract loss to Orbital

WASHINGTON, Sept 28 (Reuters) - Shares in Aerojet Rocketdyne Holdings Inc fell another 4 percent on Monday after a spate of bad news for its space business, including the loss of a key contract to its rival Orbital ATK.

The company’s shares closed $0.65, or 3.9 percent lower at $16.05 on the New York Stock Exchange, a drop of about 33 percent from a high of $24.35 in July.

United Launch Alliance, a 50-50 rocket launch venture of Boeing Co and Lockheed Martin Corp, last week said it would dump Aerojet, its current supplier of solid rocket motors for its Altas V rockets, and switch to rival Orbital ATK as its sole supplier from 2019.

Earlier this month, Boeing rejected a $2 billion cash offer from Aerojet to buy ULA. Aerojet is considering raising its offer, but faces tough challenges going forward, sources familiar with the issue told Reuters last week.

The company also announced last week that it would pay Orbital $50 million to settle a dispute stemming from a rocket launch accident last year that destroyed a load of cargo bound for the International Space Station.

Analysts with Oppenheimer Securities and KeyBanc Capital Markets each still have a target of $26 for the company’s stock.

Michael Ciarmoli, aerospace and defense analyst with KeyBanc, attributed the share price drop to uncertainty about the impact of the solid rocket booster loss, and the fact that the company’s management was not actively engaging with Wall Street investors or analysts.

“A lot of the damage to Aerojet’s stock price ... is self-inflicted,” said Ciarmoli. “Management is not talking to anyone. There is no message to Wall Street.”

KeyBanc and Oppenheimer highlighted the continued strength of the company’s tactical and defense businesses, including key work on the Raytheon Co Standard Missile-3 and Lockheed’s Terminal High-Altitude Area Defense (THAAD) system.

The company also has over 12,000 acres of valuable land in Sacramento, of which about half could be sold, accounting for about $3 to $8 of the stock price target, analysts said.

Aerojet has said it will keep supplying solid rocket motors to ULA until 2019, and plans to aggressively go after a contract to replace the U.S. Air Force’s intercontinental ballistic missiles (ICBMs), as well as potential commercial orders.

But without the ULA booster work, the company would face higher costs that could make it difficult to wrest the ICBM contract away from the current incumbent, Orbital ATK. (Reporting by Andrea Shalal; Editing by Tom Brown)

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