AeroVironment shares soared more than 20% at midday Wednesday after the drone maker announced earnings that topped expectations, but gave a mixed outlook.
The company reported fiscal fourth-quarter sales of $275.1 million, an increase of 40% that was above views. Non-GAAP earnings climbed 274% to $1.61 a share vs. 43 cents in the year-ago period.
Analysts' consensus earnings estimate was $1.38 a share, according to FactSet. The latest earnings broke a streak of four straight declining quarters.
Sales for the April-ended quarter were expected to climb 23% to $241.5 million. That follows sales increases of 6%, 24% and 4%, plus a 10% drop in the January-ended quarter.
Gross margin for the April-ended fourth quarter jumped 33% to $100.3 million, year over year. The company's funded backlog increased to $726.6 million from $400.2 million at the same time last year. For the fiscal year, it earned $3.28 a share on a non-GAAP basis, up 10%.
AeroVironment forecast current fiscal-year revenue of $1.9 billion to $2 billion, well above analysts' estimates of $1.337 billion. But it guided non-GAAP earnings of $2.80 to $3 per share. The consensus EPS estimate for the fiscal year ending April 2026 provided by FactSet is $3.82 a share.
The company also said it has not completed the valuation of intangibles from its May acquisition of BlueHalo, and cannot estimate the amortization expense with reasonable accuracy. It believes that "such reconciliation could imply a degree of precision that might be confusing or misleading to investors."
In March, quarterly results missed views because California wildfires affected factory operations, and President Donald Trump showed wavering support for Ukraine. In a Dec. 4 quarterly report, earnings missed views due to higher costs.
Drone Maker's Advantage
AeroVironment stock is not a leader in the aerospace and defense industry group. Its Composite Rating of 85 is below the 90 normally associated with leading stocks, and leaves it about the middle among 73 stocks in the group, according to IBD Stock Checkup.
Yet, in fundamental terms, the Arlington, Va.-based company is in the middle of an unshakable trend in warfare, namely the increasing use of drones as munitions and as electronic sensors. Its product lineup includes systems for land, sea, air and space operations.
One of its most celebrated products is the Switchblade, a flying drone that's first used to look for targets and then is sent to a chosen target with an explosive payload. The weapon has been a battlefield success in Ukraine. Its Puma drones also have seen heavy use by Ukrainian forces.
This year, AeroVironment introduced the P550, which can quickly switch from reconnaissance to attack mode. It can stay aloft for up to five hours.
AeroVironment competes against other defense contractors such as Kratos Defense & Security Solutions that also make drones. On June 13, another rival went public: AIRO Group Holdings priced at $10 a share in its initial public offering and climbed as high as 39.07. Today, the drone company trades around 22.50.
Drone Maker's Stock Recovering
AeroVironment stock is recovering from a 57% decline from its all-time peak in November to a low in April. A handle is forming with a 202.74 buy point. The stock is also near another entry at 188.79.
Shares gained more than 21% Wednesday at midday, after trading lower in Tuesday's after-hours session.
AeroVironment stock has a 21-day average true range (ATR) of 4.46%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
