Space shuttle loss hurts Lockheed, other NASA stocks


As NASA continued to investigate the shuttle Columbia's disintegration and ponder the future of the nation's manned space program, Wall Street seemed to draw its own conclusion yesterday and punished stocks of the shuttle's manufacturers - along with virtually any other company that does business in space.

Shares of primary space shuttle contractors Boeing Co. and Lockheed Martin Corp. tumbled yesterday, along with those of secondary NASA suppliers including L-3 Communications, Orbital Sciences Corp. and Ducommun Inc.

Hardest hit was Alliant Techsystems Inc., the Edina, Minn., company that makes the shuttle's two rocket boosters and owns the remnants of Morton-Thiokol Inc., whose components were blamed for the explosion of the shuttle Challenger in 1986. Its shares fell almost 12 percent.

All of the National Aeronautics and Space Administration's shuttle launches are on hold while the Columbia accident is investigated, as are missions to the International Space Station.

Despite assurances from President Bush and other federal officials that the exploration of space will continue, anxiety about the duration of NASA's grounding dampened investor enthusiasm for much of the space industry, analysts said.

"An incident like that causes a lot of uncertainty, and I think everyone is feeling it," said Marco A. Caceres, a space industry analyst for Teal Group Corp., an aerospace consulting firm in Fairfax, Va.

"If you step back and look at NASA's future as a whole, things are less grim. The manned exploration of space will continue - it has to," Caceres said. "But right now, as you can imagine, everyone is a little gun shy."

No company has a greater stake in NASA's manned space program than Boeing, the Chicago-based aerospace manufacturer that inherited the space shuttle program when it bought the aerospace business of the craft's original contractor, Rockwell International Corp., in 1996.

Boeing also is the prime contractor for the International Space Station and a joint partner with Lockheed Martin in United Space Alliance, an enterprise that is in its seventh year of an eight-year, $9.8 billion contract to manage NASA's shuttle program.

More than $2 billion of Boeing's $54 billion in annual revenue comes from NASA programs, at a time when company executives are counting on government contracts to offset the weakened market for commercial aircraft, Boeing's specialty. Its shares fell 48 cents, or 1.5 percent, yesterday to close at $31.11 on the New York Stock Exchange.

Alliant Techsystems Inc. is under contract with NASA to produce 74 booster rockets through 2007, accounting for roughly 17 percent of the company's $2.14 billion in annual revenue. The booster rockets, built by the company's Thiokol Propulsion division in Utah, are not considered a likely cause of Columbia's demise, as they were during the Challenger explosion.

But the rockets could become obsolete if NASA chooses to pursue a new space shuttle design or to develop cheaper, reusable rockets, Caceres said.

Company spokesman Rod Bitz said production is proceeding and that "nothing has changed for us right now," but Caceres said investors were likely concerned for the future of such a large percentage of the company's revenue. Alliant Techsystems shares fell $6.34, or more than 11.6 percent, to close at $48.02.

"There's just a lot of uncertainty right now about NASA's future," said Herbert Hardt, a partner in the New York investment firm Monness, Crespi, Hardt & Co. Inc., which owns shares of Alliant Techsystems. "But this is an extremely well managed company, and you have to believe that the space program will continue. The space station has 16 nations that have helped to fund it."

NASA engineers investigating Columbia's failure focused much of their attention yesterday on the possible damage caused by a piece of insulation that broke off an external fuel tank and hit the left wing during the shuttle's Jan. 16 launch.

While stressing that the investigation is incomplete and that several theories exist, NASA Associate Administrator William F. Readdy said the insulation issue "is certainly the leading candidate."

The 154-foot external tank is made by Lockheed Martin at its Michoud Assembly Facility near New Orleans. Shares of Lockheed Martin, which collects about $700 million in revenue from the shuttle program, fell $1.50, or nearly 3 percent, to close at $49.55.

Few companies related to the shuttle program were spared on the trading floor yesterday. Shares of Orbital Sciences, which makes robotic and electronics components, fell 17 cents to $5.28, and shares of Ducommun, a contractor for the shuttle's external tanks, fell 28 cents to $13.06. L-3 Communications, which makes communication systems for the space station, fell $1.50 to $43.27.

But analysts say the future of the space system is less than bleak, despite the market's treatment yesterday.

Several components of the International Space Station have already been built and are ready for launch - components so large that only a space shuttle can get them aloft, and so costly that they are unlikely to be abandoned.

And Boeing, Lockheed Martin and a team that includes Orbital Sciences and Northrop Grumman Corp. all are competing to develop a new generation of reusable launch vehicles, a multibillion-dollar endeavor that Congress could accelerate if it has lost confidence in the shuttle.

"If you look at the possibility that this disaster could lead to a greater call for research and development of a new launching system, then there could actually be the possibility of more revenue," said Michael F. Legg, an analyst for Jefferies & Company Inc. in New York.

The White House released its proposed budget yesterday for the 2004 fiscal year, which begins Oct. 1, and called for increasing NASA's spending by about 3 percent to nearly $15.5 billion next year.

The plan, prepared before Saturday's accident, proposed increasing the shuttle program's budget from $3.2 billion this year to $3.9 billion next year.

"My suspicion is that you're going to see the shuttle grounded for a few months while the Columbia incident is investigated, but I'd be surprised if the fleet isn't up and running in less than a year," Caceres said. "Schedules will have to be completely configured, but the shuttle fleet could fly for another 20 years. It's a very important element of the space program."

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