Monday, May 11, 2009 11:33:53 AM
True, sales grew only 8%, and operating margins came in at a mere 8% -- results far short of the gangbusters growth of yester-quarter. True, too, AeroVironment management pulled back the throttle on guidance, and now projects it will book between $240 million and $250 million in sales this year, reaping at most $35 million thereon.
Funded backlog is up more than 100% over last year despite the recession, a fact which explains the extreme interest in unmanned aerial vehicles (UAVs) we've been seeing from defense industry stalwarts like Boeing (NYSE: BA), Textron (NYSE: TXT), L-3 (NYSE: LLL), and Northrop Grumman (NYSE: NOC). But no doubt about it, in the here and now, AV has significantly undershot previous guidance of low-20s growth.
Reality bites
So why do I find these numbers less disheartening than the Street? To learn the answer, you must travel back in time three months, and listen to what the company told us in December. I mean really listen -- not just skim the headlines and press the "buy" button when a single quarter glows green.
Listen:
"An increase [in] investments in [various operating costs would] ... bring our ... operating margin in line with our original targets for the year."
"The company closes ... many times ... between Christmas and New Years, reducing production during our third quarter. [As a] result ... our third quarters have been flat or down from our second quarters."
Thus, there was every reason in the world to expect profits to be down in Q3. And there may have been some irrational exuberance in shares rising up to ridiculous pre-earnings heights.
Where to from here?
So here we sit, one "bad" earnings report and 34% worth of lost market cap later, reviewing the carnage. Is it at least safe to buy AeroVironment now?
Maybe. Here's how I come at the problem:
Over the past three quarters, AeroVironment generated $12.1 million in free cash flow. Applied to current revenues, that makes for about a 7% cash profit margin on revenues. So, if AeroVironment is right about its full-year guidance, it should generate a total of about $17.2 million in cash flow this year. Trading at 24 times expected full-year cash flow and a 20% long-term growth rate, the stock looks a little overvalued to me. Personally, I'd prefer a steeper discount before buying more shares -- but we're getting close.
Recent AVAV News
- AV Successfully Flight Tests JUMP 20 VTOL UAS with a Heavy Fuel Engine • Business Wire • 06/18/2024 01:10:00 PM
- AeroVironment, Inc. Schedules Fourth Quarter and Full Fiscal Year 2024 Earnings Release and Conference Call • Business Wire • 06/13/2024 09:21:00 PM
- AeroVironment to Host 2024 Analyst and Investor Day in New York City on June 27 • Business Wire • 06/10/2024 08:43:00 PM
- Form SD - Specialized disclosure report • Edgar (US Regulatory) • 05/31/2024 12:00:10 PM
- AeroVironment to Develop its Wildcat Autonomous VTOL UAS for DARPA’s ANCILLARY Program • Business Wire • 05/28/2024 01:10:00 PM
- AV’s Switchblade 600 Selected for Tranche 1 of the U.S. Department of Defense’s Replicator Initiative • Business Wire • 05/07/2024 01:10:00 PM
- AeroVironment, Inc. to Present at the Bank of America Transportation, Airlines, and Industrials Conference • Business Wire • 05/02/2024 09:33:00 PM
- AV Unveils New AI Capability and Autonomy Kit for Unmanned Systems • Business Wire • 04/23/2024 01:10:00 PM
- AV’s Switchblade 300 Selected for U.S. Marine Corps’ Organic Precision Fires-Light Program • Business Wire • 04/18/2024 08:10:00 PM
- AV Enters Teaming Agreement with Parry Labs to Develop Modular Next-Generation Long Range Reconnaissance UAS • Business Wire • 04/15/2024 08:10:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/11/2024 03:51:40 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 03/09/2024 12:00:48 AM
- Form 8-K/A - Current report: [Amend] • Edgar (US Regulatory) • 03/08/2024 08:43:50 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 03/07/2024 09:07:09 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 03/07/2024 08:22:24 PM
- AMD Hits Regulatory Roadblock, GitLab’s Stock Tumbles on Disappointing Earnings, and Latest News • IH Market News • 03/05/2024 11:05:08 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 03/04/2024 10:19:49 PM
- AeroVironment Announces Fiscal 2024 Third Quarter Results • Business Wire • 03/04/2024 09:10:00 PM
- Form 8-K/A - Current report: [Amend] • Edgar (US Regulatory) • 02/22/2024 05:35:04 PM
- AeroVironment, Inc. Schedules Third Quarter Fiscal Year 2024 Earnings Release and Conference Call • Business Wire • 02/19/2024 07:37:00 PM
- AeroVironment’s Puma 3 AE Now Offers Extended Endurance of Up To 3 Hours • Business Wire • 02/14/2024 02:10:00 PM
- AeroVironment’s Tomahawk Product Line Awarded $2.67 Million Contract by the Department of Defense for Grip Tab Active Controllers • Business Wire • 02/08/2024 02:10:00 PM
- AeroVironment Announces First Successful Multi-Drop, Live Fire GPS-Guided Shryke Munitions from a VAPOR 55 MX Unmanned Aircraft System • Business Wire • 01/09/2024 02:10:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 12/12/2023 05:54:49 PM
- AeroVironment Awarded $16 Million U.S. Navy Contract for the Advancement of Video Analytics and Computer Vision Research to Support Multi-Domain Robotics Initiatives • Business Wire • 12/12/2023 02:10:00 PM
Last Shot Hydration Drink Announced as Official Sponsor of Red River Athletic Conference • EQLB • Jun 20, 2024 2:38 PM
ATWEC Announces Major Acquisition and Lays Out Strategic Growth Plans • ATWT • Jun 20, 2024 7:09 AM
North Bay Resources Announces Composite Assays of 0.53 and 0.44 Troy Ounces per Ton Gold in Trenches B + C at Fran Gold, British Columbia • NBRI • Jun 18, 2024 9:18 AM
VAYK Assembling New Management Team for $64 Billion Domestic Market • VAYK • Jun 18, 2024 9:00 AM
Fifty 1 Labs, Inc Announces Acquisition of Drago Knives, LLC • CAFI • Jun 18, 2024 8:45 AM
Hydromer Announces Attainment of ISO 13485 Certification • HYDI • Jun 17, 2024 9:22 AM