Should You Buy, Hold or Sell Rocket Lab Stock Ahead of Q4 Earnings?

Rocket Lab USA, Inc. RKLB is slated to report fourth-quarter 2024 results on Feb. 27, 2025, after market close. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for revenues is pegged at $129.9 million, suggesting an improvement of 116.6% from the year-ago quarter’s reported figure. The consensus mark for the bottom line is pegged at a loss of 10 cents per share, implying no change from the loss incurred in the prior-year quarter. The bottom-line estimate has moved down in the past 60 days.Image Source: Zacks Investment ResearchRocket Lab has a decent earnings surprise history. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 9.04%.Image Source: Zacks Investment ResearchEarnings WhispersOur proven model does not conclusively predict an earnings beat for RKLB this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Rocket Lab has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00% at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Key Factors to ConsiderThe strong revenue performance across both the company’s business segments is likely to add an impetus to its overall fourth-quarter results amid the effects of higher operating expenses.RKLB’s Launch Services Unit to Post Solid SalesHigher revenue per launch, backed by solid volume growth, as well as solid revenue contributions from strong bookings witnessed in the prior quarters must have bolstered the top line of the Launch Services business segment.The Zacks Consensus Estimate for the segment’s quarterly revenues is pegged at $37.5 million, indicating a massive 343.3% increase from the top line reported a year ago.RKLB’s Space Systems Unit Also Holds PotentialSolid growth in spacecraft manufacturing, along with a strong contribution from RKLB’s space solar business, is likely to have boosted revenue growth for its Space Systems business segment.The Zacks Consensus Estimate for the segment’s fourth-quarter revenues is pegged at $92.37 million, indicating 79.3.3% growth from the year-ago quarter’s reported figure.What Impacted RKLB’s Bottom Line?Such a solid top-line projection is likely to have aided RKLB’s fourth-quarter bottom-line growth. However, higher operating expenses due to increased staff costs and related infrastructure IT expenses, as a result of hiring and prototype spending to expand the company’s spacecraft and spacecraft components product portfolio, might have put downward pressure on its operating margin. This, in turn, might have adversely impacted its overall earnings.Price Performance & ValuationRKLB’s shares have exhibited an upward trend, gaining a notable percentage over the past year. Specifically, the stock soared 330.5% in the timeframe, outperforming the Zacks aerospace-defense industry’s decline of 5.9%. It has also outpaced the broader Zacks Aerospace sector’s return of 1.4% as well as the S&P 500’s gain of 18.8%.Image Source: Zacks Investment ResearchA similar stellar performance has been delivered by other industry players, such as Embraer ERJ, Archer Aviation ACHR and RTX Corp. RTX, whose shares have surged 122.4%, 61.9% and 40.8%, respectively, over the past year. In terms of valuation, RKLB’s forward 12-month price-to-sales (P/S) is 16.31X, a premium to its industry’s average of 1.58X. This suggests that investors will be paying a higher price than the company's expected sales growth compared to that of its industry’s P/S ratio.Image Source: Zacks Investment ResearchInvestment ThesisAccording to an April 2024 report by the World Economic Forum, the global space economy is projected to reach $1.8 trillion by 2035 as satellite and rocket-enabled technologies become more widespread. Such growth prospects offer solid opportunities for Rocket Lab to enhance its footprint in the global space economy, with its Electron rocket ranking as the second most frequently launched orbital rocket among U.S. companies.However, RKLB faces certain challenges at present, which one should consider before investing in the stock. One such hazard is the high operating expenses that the company incurs due to its consistent investments in developing new products and enhancing the existing ones. Such high operating expenses largely offset the benefits of strong revenue growth, thereby causing RKLB to report quarterly losses. To this end, Rocket Lab expects its operating expenses to increase in the future. If RKLB’s revenue growth does not increase enough to offset the anticipated rise in operating expenses, it may not be able to achieve profitability.Should You Buy RKLB Before Feb. 27?To conclude, investors interested in RKLB should refrain from adding this stock to their portfolio before Thursday, considering its premium valuation as well as higher operating expenses. The company might disappoint with its fourth-quarter results, considering the downward revision in its quarterly earnings estimates as well as an unfavorable Zacks rank.Moreover, RKLB currently has a VGM Score of F, which is another indicator of the stock’s poor performance. Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Embraer-Empresa Brasileira de Aeronautica (ERJ): Free Stock Analysis Report RTX Corporation (RTX): Free Stock Analysis Report Rocket Lab USA, Inc. (RKLB): Free Stock Analysis Report Archer Aviation Inc. (ACHR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks