Space ETFs Soar on Rocket Lab's Q3 Earnings Beat and New Deal

Shares of Rocket Lab USA RKLB, a key competitor to Elon Musk’s SpaceX, skyrocketed over 40% to an all-time high during intraday trading on Wednesday. The surge followed the release of the company’s third-quarter earnings, which surpassed expectations, and the announcement of a new contract with a commercial satellite constellation operator.

Inside Quarterly Results

Rocket Lab USA, which belongs to the Zacks Aerospace - Defense industry, posted revenues of $104.81 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 2.01%. This compares to year-ago revenues of $67.66 million.

The company came up with a quarterly loss of $0.10 per share versus the Zacks Consensus Estimate of a loss of $0.11. This compares to a loss of $0.08 per share a year ago. These figures are adjusted for non-recurring items.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Looking ahead, Rocket Lab expects Q4 revenue between $125 million and $135 million, ahead of Zacks Consensus Estimate of $120.94 million.

New Contract and Reusable Rocket Plans

Rocket Lab announced a contract to launch two satellite deployment missions with its reusable Neutron rocket, starting in mid-2026. The first launch of the Neutron rocket is scheduled for 2025, which could position the company to compete for contracts in the U.S. government’s $5.6 billion initiative, overseen by the Space Force. The request for proposals opened on Oct. 30, and qualified vehicles are anticipated to join the program by spring 2025.

Market Outlook and Future Opportunities

With this new contract and reusable rocket plans, Rocket Lab has seen its share price surge in 2024. Rocket Lab USA shares have added about 254.6% since the beginning of the year versus the S&P 500's gain of 26.4%. The company anticipates strong demand for satellite launch services, projecting that over 10,000 commercial and government satellites will require launch services by 2030.

This demand could create a $10 billion addressable market, positioning Rocket Lab to capture a significant share alongside Elon Musk’s SpaceX, which recently secured a $734 million contract from the U.S. Space Force for a series of upcoming missions (read: Beyond Tesla, Bet on Elon Musk With These Stocks & ETFs).

Space ETFs to Tap

The space industry is thriving currently.  According to a report by McKinsey, the global space economy is estimated to reach a valuation of $1.8 trillion by 2035. Maintaining an impressive annual growth rate of 9% and outpacing global GDP expansion, the space economy is projected to surge to $1.8 trillion by 2035 from $630 billion in 2023, according to the report (read: $1.8T Space Boom Expected by 2035: ETFs to Play).

As global investments increasingly prioritize climate control, the advancements in space technologies promise significant benefits. The global space tourism market is estimated to witness a CAGR of 44.8% from 2024 to 2030 after being valued at $851.4 million in 2023, according to Grand View Research.

Against this backdrop, Rocket Lab USA’s latest earnings and new deal boosted space-related exchange-traded funds (ETFs) to a new high. Space ETFs including Procure Space ETF UFO, SPDR Kensho Final Frontiers ETF ROKT and Ark Space Exploration & Innovation ETF ARKX hit a new 52-week high on Nov. 13. These ETFs added about 4.5%, 2.6% and 2.2%, respectively, on Nov. 13, 2024.

The Rocket Lab stock has about 10% exposure to ROKT, while UFO and ARKX invest about 8% and 7.7% of their respective weights in the Rocket Lab stock. The ETF UFO charges 75 bps in fees, while ROKT and ARKX charge 45 bps and 75 bps, respectively (see all Industrials ETFs here).

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