AeroVironment Inc. (AVAV) shares dropped more than 12% Wednesday after the defense technology company delivered a mixed earnings report that showed impressive top-line growth but disappointing profitability.
The Numbers Tell Two Stories
AeroVironment reported adjusted earnings of 44 cents per share for the second quarter, significantly missing the Street's expectation of 78 cents. On the revenue side, though, the company exceeded estimates with $472.50 million versus the $468.48 million consensus.
That revenue figure marked a record for the company, soaring 151% year-over-year thanks largely to its BlueHalo acquisition. The Autonomous Systems segment generated $301.6 million, while the Space, Cyber and Directed Energy business contributed $170.9 million.
Growth Comes With Growing Pains
The company posted a net loss for the quarter as integration challenges mounted. Higher selling, general and administrative expenses combined with increased research and development spending to pressure margins. Add in $48.2 million in intangible amortization and other non-cash purchase accounting charges related to the acquisition, and you've got a profit squeeze.
Gross margins also declined as the business mix shifted toward more service work and acquisition-related amortization expenses weighed on results.
There's a bright spot in the order book: AeroVironment reported bookings of $1.4 billion and an impressive book-to-bill ratio of 2.9. Funded backlog reached $1.1 billion as of November 1, up from $726.6 million at the end of April.
Revised Outlook
Management adjusted its full-year guidance to reflect the integration realities. The company lowered its adjusted earnings per share forecast from $3.60-$3.70 to $3.40-$3.55, below the consensus estimate of $3.64. On the flip side, revenue guidance ticked up from $1.90-$2.00 billion to $1.95-$2.00 billion, just shy of the $1.99 billion consensus.
Following the report, Cantor Fitzgerald analyst Colin Canfield maintained an Overweight rating on AeroVironment but trimmed his price target from $335 to $315.
At last check, AVAV shares were trading 12.12% lower at $247.24.
