AeroVironment missed targets for its second quarter financial results Tuesday afternoon. The drone maker's earnings dove even worse than expected — even as its unmanned aerial vehicles play a significant role in the war in Ukraine. AVAV stock fell after hours on Tuesday after descending during the trading day.
Hundreds of drones patrol Ukraine's skies everyday. They've been an instrumental weapon of war for both sides since Russia invaded the country in February. But Russia faces a drone shortage and has lagged in training soldiers to pilot UAVs, the Washington Post reports. Meanwhile, Ukraine deployed reconnaissance and attack drones to lead its September counteroffensive which successfully resulted in a Russian retreat.
The United States provided Ukraine with hundreds of AeroVironment's Switchblade 300 "Suicide Drones." The attack UAVs are designed to target small groups of soldiers or armored vehicles, according to the Washington Post. The Switchblade is shot from a tube, similar to a mortar or bottle rocket, then crashes into its target and detonates its warhead on impact.
United24, the Ukrainian state crowdfunder, has contracts to buy nearly 1,000 UAV's as part of its "Army of Drones" initiative, with the eventual goal of a 10,000-drone fleet.
And Wall Street expects AeroVironment to benefit from additional aid on the way to Ukraine. Switchblade 300 and 600 procurements are expected to be part of the 2023 Ukrainian aid package, Canaccord analyst Austin Moeller noted on Nov. 18. AeroVironment's orders have accelerated since August, which should keep its record backlog hovering above $300 million, Raymond James analyst Brain Gesuale wrote in mid-November.
AVAV Earnings
Expectations: In Tuesday's report, analysts saw AeroVironment earnings plummeting 74% to 20 cents per share while sales fell 6.6% to $113.9 million, according to FactSet. Company earnings tend to be volatile, depending up when contracts land. In the year-ago quarter, earnings surged more than 62%, as the company's military drone sales gained traction.
Results: AeroVironment's adjusted earnings per share dropped to $0 as revenue fell 9% to $111.6 million for the quarter.
The revenue drop was due to a $28 million decrease in its small unmanned aircraft systems segment. Meanwhile, the company's gross margins fell 39% from unfavorable product mixes and accelerated depreciation charges, AeroVironment says.
And AeroVironment's backlog rose to $388.2 million from $293.1 million at the end of October.
AeroVironment slashed its full year outlook following the results. It's now expecting non-GAAP earnings to range between $1.26 per share and $1.58 per share. The company projected full year EPS of $1.35 to $1.65 with its first quarter results in June. Wall Street cut its outlook for fiscal 2023 to $1.57 per share from $1.75 per share following the Q1 results, according to the FactSet consensus.
The company declined to provide a guidance for its third quarter results. Currently, analysts expect Q3 earnings to spike 28% to 41 cents per share, while revenue soars 40% to $126.6 million. The company's backlog is seen growing to $342 million in Q3 before increasing to $406 million in the fourth quarter.
AVAV Stock
AeroVironment stock dropped more than 4% following the earnings results. Shares fell 4% by market close Tuesday prior to the report. AVAV stock is up 40% so far this year. It is well off its highs from early April, but just 9% below a 94.42 entry in a cup-with-handle base.
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Black Hawk Replacement Contract
In other defense news, Textron shares rallied Tuesday after the U.S. Army selected the company for an $80 billion contract to build a new fleet of attack helicopters. Textron's Bell Helicopter subsidiary beat out Boeing and Lockheed Martin for rights to replace the Black Hawk utility chopper. Bell's V-280 Valor helicopter was selected as the model for the new fleet.
The $80 billion contract provides a huge boost to Textron, which had a market cap of $14.6 billion as of Tuesday morning. Meanwhile, Bell Helicopter made up about 25% of Textron's third quarter revenue, Reuters reports.
TXT stock jumped more than 6% on Tuesday, clearing a 72.15 early entry in an eight-month long cup base.
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