Key Points
York Space Systems missed on both sales and earnings last night.
Management says it has "identified" 30% more contracts that it can bid on.
York Space Systems (NYSE:YSS) stock crashed and burned on Friday, tumbling 16.7% through 11:20 a.m. ET after delivering a gigantic earnings miss last night. Heading into the report, analysts already weren't optimistic, forecasting the satellite manufacturer would lose $0.23 per share on sales of just $90 million -- but the actual news was much worse than that:
York lost $5.99 per share, and its sales were only $84.2 million.
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York Space Systems Q3 "earnings"
Analysts thought York's revenue would hold more or less steady year over year, but instead it declined by 7%. Worse, the gross profit margin York earned on the sales it did make contracted by four full percentage points to 18%.
Management is hoping things will improve on the sales front at least, noting that it has "identified" 30% more contracts that it can bid on. Unfortunately for York, the company had to take a $749.7 million "non-cash goodwill impairment charge" in the quarter, precisely because of "the difficulty in estimating with sufficient certainty the timing and amount of future contract awards beyond 2026."
So not everything is working out as planned regarding future contract wins -- and this is also why York had to report a larger-than-expected net loss for Q3.
What this means for York Space investors
Given the sales decline and the impairment charge York just took, I think it may be more important than ever to evaluate York stock based not on its sales or earnings, but on the actual free cash flow the company is bringing in -- and the news there is not great.
Year-to-date, York has burned $256 million, nearly 3x its cash burn rate at this time last year. With less than $309 million left in the bank, York looks on course to be out of cash a year from now.
Given this, I wouldn't be a buyer of York stock today.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends York Space Systems. The Motley Fool has a disclosure policy.