Boeing Co. ’s Starliner space capsule launch could be delayed several months as the company will likely need to remove it from atop a rocket for repairs, people familiar with the matter said.
Such a delay would be a setback for Boeing’s space program. The company has spent years developing the Starliner and was supposed to launch it late last month to dock with the International Space Station, without crew on board—after a failed attempt a year and a half ago. Ultimately, the capsule is supposed to ferry astronauts to the space station.
Boeing engineers have been working to repair a problem with some of the valves in a propulsion system on the Starliner that was discovered earlier this month while the vehicle sat on a launchpad. The company first said it was investigating the valve issues last week, and on Monday disclosed that 13 valves had failed to open as expected during preflight checks.
Nine of the valves are now functioning and Boeing engineers are working to address the other four, the company said Thursday.
“Over the past couple of days, our team has taken the necessary time to safely access and test the affected valves,” said John Vollmer, a Boeing executive overseeing the Starliner.
Boeing Co. said a second attempt to launch its Starliner space taxi has been canceled, with launch officials on Tuesday citing inclement weather. The testing of the capsule precedes its planned first flight with astronauts on board later this year.
The National Aeronautics and Space Administration previously said it has another launch window on Wednesday.
A botched effort in late 2019 dented the record of a company that has been at the forefront of U.S. space exploration, including the Apollo missions to the moon. The Starliner is the latest of an array of new rockets, capsules and other vehicles aimed at furthering U.S. ambitions in a new space race to the moon, Mars and beyond.
The Starliner would give the U.S. more options to reach low earth orbit and the space station. U.S. astronauts had to hitch rides on Russian Soyuz spacecraft to get there following the retirement of the Space Shuttle in 2011. NASA opted to outsource a replacement through its Commercial Crew Program and picked Boeing and Space Exploration Technologies Corp., the formal name for Elon Musk’s SpaceX, to provide space taxi services.
The CST-100 Starliner is slated to deliver more than 400 pounds of NASA cargo and crew supplies, and bring back material including oxygen tanks. A mannequin named Rosie the Rocketeer is expected to be on board, equipped with sensors to capture data ahead of a crewed mission.
Shares of Lockheed Martin are up 7.3% year to date.
Luca Barioulet/AFP via Getty Images
Defense giant
Lockheed Martin
cruised past Wall Street second-quarter earnings expectations—with one caveat—and raised its full-year earnings guidance. Still, shares tumbled Monday.
For the quarter, Lockheed (ticker: LMT) reported $6.52 in per-share earnings from $17 billion in sales, in line with Wall Street’s expectations for $6.53 in per-share earnings from $17 billion in sales. But Lockheed recorded a $0.61 per-share charge related to “performance issues experienced on a classified program” at its jet-making franchise Aeronautics. These kinds of expenses, labeled as a special charge by Lockheed, typically don’t repeat.
Removing that 61-cent charge makes Lockheed’s quarter look solid. What’s more, the company raised its full-year guidance. Lockheed now expects to earn about $26.85 for full-year 2021, up from the guidance of $26.55 given in April.
Lockheed has raised full-year earnings guidance when reporting both its first- and second-quarter numbers.
“Lockheed’s execution over recent years has been so good that we can’t even remember when the last time was that we saw the company take an operating charge,” wrote Vertical Research Partners analyst
Rob Stallard
in a Monday report. “We would imagine that investors had been expecting the usual ‘beat and raise’ performance for 2Q, and so today’s inline result with no change to the operating guidance is likely to prove a disappointment.”
That looks like a good call. Lockheed stock was down more than 3% in early trading. The
S&P 500
and
Dow Jones Industrial Average
were about flat. But Stallard recommends buying the dip: “Should the stock sell-off heavily, then this could be a good entry point.” He rates shares Buy and has a $443 price target for the stock.
“In my first year leading our company, I’m proud of the extraordinary resolve demonstrated by our 114,000 team members to rise above the challenges of the pandemic in support of our customers, our nation and our allies.” said
James Taiclet,
Lockheed Martin chairman, president and CEO. “Our teams continue to deliver on key platform programs while also advancing technologies critical for 21st century deterrence and scientific discovery.”
Taiclet seems pleased. Sales grew in each of the company’s segments: aeronautics, missiles, helicopters, and space systems. Total sales grew about 5% year over year.
Lockheed management scheduled a conference call for analysts and investors at 11 a.m. eastern. Investors will want to hear about the defense budget and its impact on Lockheed sales as well as the outlook for profit margins.
Year to date, Lockheed stock is up 7.3%, trailing behind the comparable 17.5% gain of the
S&P 500.
Lockheed stock, however, trades for 13.6 times estimated 2022 earnings. The S&P 500 trades for 20.5 times estimated 2022 earnings.
’ plans for space go far beyond the short trip he is slated to take there Tuesday.
The
Amazon.com Inc.
AMZN -1.59%
founder has poured billions into his Blue Origin LLC space venture over more than two decades, believing humanity must ultimately establish outposts across the solar system.
More immediately, Mr. Bezos’ company is seeking business in a space market that will triple in size to more than $1 trillion in annual sales by 2040, Morgan Stanley says, assuming rapid technological developments enable routine moon landings, asteroid mining and space tourism.
Blue Origin’s crew capsule interior. The company has spent years developing rockets, engines and vehicles.
Photo:
Blue Origin
His own giant leap comes when Blue Origin is scheduled to launch Mr. Bezos and three other people to the edge of space in an 11-minute flight, the first launch with passengers on the company’s New Shepard rocket.
A successful trip could provide traction in an emerging space-tourism market, which includes
Richard Branson’s
Virgin Galactic Holdings Inc.
Blue Origin’s broader challenge is winning the kind of large government contracts that provide a steady revenue stream and lend credibility to companies that secure them. Space Exploration Technologies Corp., the formal name for
Elon Musk’s
SpaceX, has jumped ahead of Blue Origin in winning those deals.
For years, Blue Origin has been building up operations and developing a portfolio of rockets, engines and vehicles. That push has been animated by what Mr. Bezos has described as his passion for space. He has cited the Apollo 11 moon-landing mission as a foundational moment for him and referenced science-fiction writers like Arthur C. Clarke and the scientist and author Carl Sagan in speeches.
A New Shepard rocket launch.
Photo:
Blue Origin
“If we’re out in the solar system, we can have a trillion humans in the solar system, which means we’d have a thousand Mozarts and a thousand Einsteins. This would be an incredible civilization,” Mr. Bezos said during a speech two years ago. To that end, Blue Origin can lower the cost of space launches, in part by developing reusable rockets, Mr. Bezos has said.
The talk from the Amazon founder has been paired with major financial commitments. Mr. Bezos has disclosed he has sold $1 billion in Amazon stock annually to fund Blue Origin.
After founding Blue Origin in 2000, Mr. Bezos began acquiring hundreds of thousands of acres of land in West Texas for the company in the early part of that decade, telling a newspaper in the area in 2005 he wanted to build a rocket launchpad on the property.
Now, in addition to the launch site in Texas, the company has facilities in Florida, California, Alabama and Washington, D.C., as well as headquarters outside of Seattle. It employs more than 3,500 people, including Chief Executive
Bob Smith,
a former executive at
Honeywell International Inc.’s
aerospace unit. The privately owned Blue Origin doesn’t release financial statements.
Mr. Bezos is “doing what he did with Amazon, which is to roll over every nickel he could get into capital equipment and innovation,” said
Howard McCurdy,
a professor at American University who has written about space and the National Aeronautics and Space Administration.
Richard Branson successfully traveled to the edge of space on Sunday, and Jeff Bezos isn’t far behind. But the two billionaire founders’ spacecrafts, flight logistics and altitudes have some differences. Photo illustration: Laura Kammermann
This year, Blue Origin intends to conduct two additional flights with passengers on the New Shepard following Tuesday’s launch, executives said Sunday at a briefing. Mr. Smith didn’t specify how much the company is selling tickets for.
“Willingness to pay continues to be quite high. Our early flights are going for a very good price,” he said.
Outside of the emerging space-tourism market, SpaceX has gained a deeper footing with space-related agencies in Washington. NASA and the Pentagon have spent $2.8 billion tied to 52 prime contracts won by the company led by Mr. Musk over the past 14 federal fiscal years, according to a federal spending database. They have spent $496.5 million in 33 contracts won by Blue Origin over that period.
Blue Origin didn’t respond to questions about competition with SpaceX or its plans for working with government agencies. Mr. Smith has in the past said the company wants to gain work with such customers.
The two companies are sparring over a deal to build a moon lander for a trip planned for 2024. The Apollo 11 moon lander reached the moon in 1969 on July 20, the same date for Mr. Bezos’ scheduled space trip on Tuesday. NASA awarded SpaceX the lander contract in April, but Blue Origin protested that decision with the U.S. Government Accountability Office, a move that could lead to NASA rebidding the contract.
The accountability agency is expected to issue a decision on Blue Origin’s case by Aug. 4. The Dynetics unit of
Leidos Holdings Inc.
also competed for the lander and filed a protest.
SpaceX is now the most prolific launcher, sending up 23 rockets so far this year, according to Federal Aviation Administration data covering licensed launches. Its reusable rockets help cut the cost of reaching space, a strategy also pursued by Blue Origin, which has completed nine such launches since late 2017.
“They need to have a track record,” said
Marco Cáceres,
a space analyst at aerospace consulting firm Teal Group, referring to Blue Origin.
The New Shepard rocket scheduled to go up Tuesday has been designed for tourist trips into suborbital space, with a six-person gumdrop-shaped capsule and windows stretching 3.5 feet by 2.3 feet along its sides. Along with the Amazon founder, the craft’s passengers are Mark Bezos, Mr. Bezos’ brother; Wally Funk, an 82-year-old pilot who graduated in the 1960s from a program for female astronauts; and Oliver Daemen, an 18-year-old Dutch student, the company’s first paying customer.
The company also has been developing the New Glenn rocket, a vehicle that will stand 321 feet tall and is designed to use seven main engines to lift large payloads to orbit. In February, Blue Origin said it had made progress on several hardware components for the rocket and that it was targeting a maiden flight for New Glenn toward the end of next year.
Blue Origin has struck deals to push its technology into the space market. The company is developing a new rocket engine for United Launch Alliance, which launches satellites for the Pentagon and U.S. spy agencies. The engine, which will replace the Russian-made motors now used, is behind schedule. Last week, NASA said Ultra Safe Nuclear Technologies, a Seattle company, would join with Blue Origin,
General Electric Co.
and other firms to design concepts for nuclear-propulsion systems that could power vehicles into deep space.
Blue Origin’s “aspirations are to become a company like SpaceX, like
Boeing,
like
Lockheed Martin,
” said
John Logsdon,
the former director of the Space Policy Institute at George Washington University.
Write to Micah Maidenberg at micah.maidenberg@wsj.com and Doug Cameron at doug.cameron@wsj.com
is already on track to be one of the most successful fund launches ever despite criticism that it doesn’t necessarily reflect the nascent space-exploration market.
Investors poured $536.2 million into the actively managed exchange-traded fund, known as ARKX, in its first five days of trading, according to FactSet data through Tuesday. That trounces the industry average of three years to gather $100 million and puts the fund on course to top $1 billion in assets within days, analysts said.
Such a milestone would put the fund in rare company: The fastest ETF to reach $1 billion was
State Street’s
SPDR Gold Trust
GLD -0.01%
fund, which hit the mark in just three days back in 2004.
“That speaks to the overall power of ARK right now,” said Nate Geraci, president of ETF Store, an investment-advisory firm. “At this point, investors think anything Cathie Wood touches turns to gold.”
The fund is ARK Investment Management LLC’s first launch in two years and stands in contrast to the lukewarm receptions its earlier products received. ARK’s flagship innovation fund, begun in 2014, took more than 3 1/2 years to reach $1 billion. Its last launch, the fintech innovation ETF in 2019, took about 21 months.
A lot has changed for ARK, though. In the span of a year, Ms. Wood’s ARK has transformed from a small, upstart manager of a handful of ETFs to one of the biggest fund managers in the U.S. The share prices of the firm’s five other actively managed ETFs doubled or tripled last year on the back of surging growth stocks such as
Tesla Inc.
and Roku Inc., earning Ms. Wood a cultlike following of individual investors who hang on her every tweet and video.
But those growth stocks are now the epicenter of a selloff that has left ARK’s older funds down at least 14% from their highs earlier this year. Rather than rolling out another fund primary tied to the tech trade, ARK has tilted nearly half of its space ETF toward manufacturers including
Lockheed Martin Corp.
,
Boeing Co.
and
Deere
DE 0.03%
& Co., a sector of the stock market that has benefited in recent months from rising interest rates and inflation expectations.
The fund is different enough for investors who say they are fans of Ms. Wood but also wary of plowing more money into a faltering tech trade.
“Most of Cathie’s ETFs are tech-heavy,” said Tré Diemer, 20 years old, a student at William & Mary who said he bought a couple of thousand dollars of ARKX shares Monday. “You look at this ETF and see a lot of names she hasn’t been as involved with.”
He already owns a variety of growth stocks and has been eyeing Ms. Wood’s other funds as a home for some of the money he earns from working as an emergency medical technician and running deliveries for
DoorDash Inc.
But tech and Ms. Wood’s other funds seemed overvalued, a point reinforced by the recent losses he said he sustained.
“You can look at this almost as a reopening ETF,” said Mr. Diemer, referring to underlying stocks poised to benefit most from a rebounding economy.
Not everyone is a fan of the fund’s makeup. Some took to social media, creating memes to mock ARK’s decision to include Deere and other companies that appear to have no significant ties to the fund’s theme of investing in space exploration and innovation. One showed a Deere tractor roving across a Mars landscape, another on the moon.
Deere, for its part, responded with several of its own memes, including one showing a UFO beaming up a tractor. Some analysts said the inclusion of Deere is less of a stretch when considering that the company makes satellite-guided machinery.
Other stocks included in the fund that seem at odds with its mandate include ARK’s passively managed 3D-printing ETF and shares of
Netflix Inc.
and
Amazon.com Inc.
Meanwhile, some of the few pure-play space stocks such as the satellite and imaging company
Maxar Technologies Inc.
didn’t make the cut. Neither did Rocket Lab USA Inc. nor Astra Space Inc., two rocket makers that are merging with blank-check companies to go public.
Ren Leggi,
a client portfolio manager at ARK, acknowledged that the holdings are causing some confusion but said that they are all in line with the fund’s mandate. “When we’re talking about space exploration and innovation, we define it as everything above ground,” said Mr. Leggi.
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The advancement of drone technology plays a big part in why several companies, including Amazon, are in the fund, said Mr. Leggi. Netflix would benefit from the rollout of satellites that enable further adoption of broadband internet for streaming, and some rocket parts are 3D-printed, he added. As for the space companies left out, Mr. Leggi said valuations of some were too rich, especially those involved with special-purpose acquisition companies, while others didn’t pass their initial evaluation of whether the stock could sustain a 15% annualized return rate.
“We still continue to track a lot of companies in case we get a market environment where there’s a broader selloff and we can get in at an attractive price,” Mr. Leggi said.
Some investors remain unconvinced.
“I was not too fond of its holdings,” said Carter Wang, who is 19 and has roughly $3,000 in four of ARK’s earlier funds. He is a fan of Ms. Wood, citing her aggressive calls on Tesla as a key reason behind his decision to invest in several of the firm’s funds. But Mr. Wang, a business management economics major at the University of California, Santa Cruz, called the inclusion of ARK’s 3D-printing ETF odd, leading him to pass on the fund.
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For several ARK investors, Ms. Wood’s past performance is key. With shares of ARKX trading around $21, some investors said they see a chance to get into the firm’s next success, likening it to ARK’s innovation fund, whose share price is six times higher since it launched in 2014 and continues to command investors’ attention. (The ETF saw record daily inflows one day last week, pulling in more than $700 million.)
“It doesn’t really bother me,” said James Carter, a 31-year-old tech writer in Washington, D.C., who snapped up shares on the space fund’s first day of trading. He said his mind was set on investing in the fund since he first heard about it earlier this year, even before any of its underlying stocks had been announced. He is holding out for the possibility that the fund ends up including shares of Elon Musk’s privately held rocket company, Space Exploration Technologies Corp.
“I was kind of late” with the other funds, Mr. Carter said of his other ARK investments. “So I specifically set money aside for the new ARK fund just because of my interest in ARK. I wanted to get in early.”
What You Need to Know About Investing
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
When a Boeing 777’s engine cover broke apart and rained parts on a Denver suburb on Feb. 20, the news rang familiar to Christopher Behnam. In February 2018, the 777 he was piloting as captain suffered a similar emergency with the same engine type.
His plane, United Airlines Flight 1175 to Honolulu, was over the ocean 120 miles from the runway carrying more than 370 passengers and crew when a violent blast rocked it.
The jet shook uncontrollably, rolled sharply, and the noise was deafening, said Capt. Behnam. An engine had suffered severe damage. Years of training kicked in, the pilots regained control and shut the engine down. Even so, the plane was hard to handle. A third pilot went into the cabin and looked out the window: The engine hadn’t just failed; its cover had ripped away.
“After the explosion, it felt like she was going to fall apart,” Capt. Behnam said. “I knew I could fly the airplane. The issue was, can I fly it long enough to land it?” The pilots brought the plane to a safe landing in Hawaii.
The National Transportation Safety Board, which investigates U.S. aviation failures, concluded that a roughly 35-pound fan blade broke in the plane’s Pratt & Whitney PW4000 engine due to fatigue, spiraling forward and causing parts of the engine cover to drop into the sea.
’s authority to inspect and sign off on several newly produced 787 Dreamliners, part of heightened scrutiny of production problems that have halted deliveries of the popular wide-body jets.
The Federal Aviation Administration said its inspectors, rather than the plane maker’s, would perform routine pre-delivery safety checks of four Dreamliners that Boeing has been unable for months to hand over to its airline customers while it grapples with various quality lapses.
The agency has long empowered Boeing to perform the final safety signoffs on the FAA’s behalf, allowing it to issue what are known as airworthiness certificates needed to hand over new jets to airlines. The FAA said it has withheld the same authority on some of the planes in previous years to keep inspectors’ skills current.
Now, the FAA said its move to withhold final-approval authority was part of a broader set of actions directed at Boeing’s 787 production issues. A spokesman said the agency could decide to have its own inspectors sign off on more Dreamliners. “We can extend the retention to other 787 aircraft if we see the need,” he said.
A Boeing spokesman said Wednesday that the company has engaged the FAA throughout its efforts to resume Dreamliner deliveries and would follow the agency’s direction on final approvals as it has in the past. The spokesman said Boeing was “encouraged by the progress our team is making” on restarting the deliveries.
After halting deliveries in October, Boeing has built up an inventory of more than 80 newly produced, undelivered Dreamliners, according to aviation consulting firm Ascend by Cirium. Boeing has said it expects to resume deliveries by the end of March.
The wide-body jets have an excellent safety record and are used frequently on international routes. Boeing learned of the FAA’s move in January and has already factored the FAA signoffs into its expected delivery schedule, a person familiar with Boeing’s planning said.
Among specific aircraft slated for final approvals by agency inspectors are two Dreamliners ordered by
United Airlines Holdings Inc.
United expects to receive the planes in late March or early April, a person familiar with the Chicago-based carrier’s plans said this week.
The Boeing spokesman said the manufacturer would adjust its delivery plans if needed so it can take the time to conduct comprehensive 787 inspections “to ensure each meets our rigorous engineering specifications.”
The suspension of deliveries has cut off a significant source of cash paid by customers as the plane maker navigates the Covid-19 pandemic and weak demand in global air travel. Bernstein analyst
Doug Harned
has estimated the Dreamliner delivery slowdown could cost Boeing as much as $8 billion in cash flow through 2020 and 2021. He expects half of that to be recovered next year as airlines take delivery and pay the rest of the cost.
Boeing said in January that it would likely continue burning cash this year but has adequate liquidity after raising billions of dollars in debt last year. Investor optimism about the broader travel recovery helped lift its shares by 21% last week. The stock gained another 3.3% on Wednesday, valuing Boeing at $149 billion.
While limited in scope, the FAA move on the Dreamliner is similar to a step the agency took after two crashes of Boeing 737 MAX jets killed 346 people in 2018 and 2019.
The FAA stripped Boeing of its authority to perform the pre-delivery safety checks on MAX jets in late 2019. At the time, a faulty flight-control system and production-related missteps with that aircraft were under congressional and regulatory scrutiny. The FAA approved the 737 MAX to resume passenger flights last year.
The Dreamliner lapses are among several quality problems Boeing has faced in recent years in its commercial, defense and space programs.
Many of the 787 quality lapses involve tiny gaps where sections of the jet’s fuselage, or body of the plane, join together. Problems have emerged in other places, too, including the vertical fin and horizontal stabilizer at the tail, according to a March 12 FAA summary of the agency’s regulatory actions viewed by The Wall Street Journal.
Boeing has previously disclosed problems with a factory process used to generate small shims—materials used to fill the small gaps where the aircraft sections are joined together. Such gaps could lead to eventual premature fatigue of certain portions of the aircraft, potentially requiring extensive repairs during routine, long-term maintenance.
In its summary, the agency said it would hold on to its Dreamliner approval authority “until it is confirmed all shimming issues are resolved and airplanes conform to the FAA-approved design.”
The Biden administration has imposed a temporary freeze on U.S. arms sales to Saudi Arabia and the United Arab Emirates as it reviews billions of dollars in weapons transactions approved by former President
Donald Trump,
according to U.S. officials.
The review, the officials said, includes the sale of precision-guided munitions to Riyadh as well as top-line F-35 fighters to Abu Dhabi, a deal that Washington approved as part of the Abraham Accords, in which the Emirates established diplomatic relations with Israel.
U.S. officials said it isn’t unusual for a new administration to review arms sales approved by a predecessor, and that despite the pause, many of the transactions are likely to ultimately go forward.
But in line with campaign pledges made by President
Biden,
Washington is seeking to ensure that American weapons aren’t used to further the Saudi-led military campaign in Yemen, where its conflict with the Iranian-aligned Houthis has resulted in thousands of civilian deaths and widespread hunger.
Mr. Biden “has made clear that we will end our support for the military campaign led by Saudi Arabia in Yemen, and I think we will work on that in very short order,” Secretary of State
Antony Blinken
said at his confirmation hearing last week. Washington will continue to help defend the Saudis against Houthi attacks, Mr. Blinken said.
Officials at the Saudi and Emirati embassies in Washington didn’t immediately comment on the developments.
Congress and the U.S. defense industry were informed of the review in recent days, one U.S. official said. It is unclear how long the review will last.
Officials couldn’t offer a precise dollar figure for the weapons sales under review. But the review, they said, includes a $23 billion deal between Washington and the Emirates for the F-35 jet fighters, Reaper drones and various munitions that was finalized on Mr. Trump’s last full day in office, according to a statement on the website of the UAE’s Washington embassy.
It also includes billions in contracts with Riyadh, including a deal for $290 million in precision-guided munitions that the U.S. government approved in late December.
“The (State) Department is temporarily pausing the implementation of some pending U.S. defense transfers and sales under Foreign Military Sales and Direct Commercial Sales to allow incoming leadership an opportunity to review,” a department spokesman said.
Calling it “a routine administrative action,” the spokesman said the review “demonstrates the administration’s commitment to transparency and good governance, as well as ensuring U.S. arms sales meet our strategic objectives of building stronger, interoperable, and more capable security partners.”
Write to Warren P. Strobel at Warren.Strobel@wsj.com
