Why the AeroVironment stock has just been destroyed


What happened

Investors shot at shares of defense contractor and unmanned aerial vehicle maker AeroVironment (NASDAQ: AVAV) out of Heaven Tuesday, and the action is down 26.2% as of 11:40 a.m. ET. The funny thing is, AeroVironment didn’t run out of wins this morning – it beat them.

Analysts had predicted AeroVironment to earn just $ 0.62 per share in the second quarter of fiscal 2022, but in fact the company said this morning its adjusted earnings were $ 0.78 per share. On the flip side, AeroVironment has been well below sales expectations, reporting quarterly sales of just $ 122 million while Wall Street forecast more than $ 130 million.

Image source: Getty Images.

So what

So, was the second fiscal quarter a good or a bad quarter for AeroVironment? Let’s dig into the details.

Second-quarter revenue jumped 32% year-over-year (YOY) at AeroVironment, but gross profit only rose 4% and operating profit plunged 76% – “mostly the result of a an increase in selling, general and administrative (“SG&A”) expenses of $ 9.8 million and an increase in research and development (“R&D”) expenses of $ 2.3 million, “the company said. While the company therefore ended up being able to report better-than-expected pro forma profits – and a 62.5% increase in YOY pro forma profits – the end result was that AeroVironment only earned 0.10. $ per share in earnings calculated under generally accepted accounting principles (GAAP) – up just 11% year-over-year.

So not only did the company sell less than expected, but sales growth was also quite anemic and profits simply did not live up to expectations.

Now what

And the news gets worse from there. AeroVironment CEO Wahid Nawabi warned that “headwinds for our business have intensified in recent months, forcing us to reduce our outlook for the full year” for the remainder of fiscal 2022. In particular, the company blamed “supply chain delays, extended supply cycles due to the global COVID-19 pandemic, [and] slower decision-making in Washington ”for its decision to reduce guidance as follows:

Full-year sales now range from just $ 440 million to $ 460 million, against Street’s expectations of $ 560 to $ 580 million. Profits will range from $ 1.23 to $ 1.37 per share, about half of what the company previously predicted, and only pro forma. When earnings are calculated under GAAP, AeroVironment will likely lose money this year – somewhere between $ 0.33 and $ 0.47 per share.

In short, it was a miserable report. Investors sell accordingly.

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Rich Smith has no position in the stocks mentioned. The Motley Fool owns shares and recommends AeroVironment. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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