AeroVironment soars following earnings as geopolitical tensions drive results

AeroVironment, a global leader in unmanned aircraft systems and tactical missile systems, reported strong Q3 earnings for the fiscal year 2024. Tensions in the Middle East and Ukraine have driven record demand for AVAV"s products. 

Shares jumped 16% following the release as the company delivered on top and bottom lines and provided a solid outlook given the global geopolitical atmosphere. The stock trades at all-time highs in after hours at $155. Investors want to see it consolidate and hold gains tomorrow. 

The company exceeded expectations, with earnings per share (EPS) of $0.63 , surpassing the consensus estimate of $0.33. Revenue rose 38.8% year-over consensus-year to $186.6 million, beating the estimate of $170.62 million. Net income of $13.9 million and adjusted EBITDA of $28.8 million, increased $14.6 million and $5.1 million, respectively. The growth was primarily driven by the Loitering Munition Systems segment, which delivered record revenue in the quarter.

The company's funded backlog as of January 27, 2024, stood at $462.8 million, reflecting the increased global demand for its solutions and strong backlog. 

AeroVironment's gross margin for the third quarter of fiscal 2024 was $67.3 million, an increase of 48% as compared to the same quarter of fiscal 2023, reflecting higher product margin of $20.1 million and higher service gross margin of $1.7 million. Gross margin was favorably impacted by a decrease in depreciation charges for in-service assets of $5.3 million related to the closure of COCO site locations during fiscal year 2023. 

Income from operations for the third quarter of fiscal 2024 was $14.3 million, as compared to $4.6 million for the third quarter of the previous fiscal year. The increase year-over-year was primarily due to higher gross margin of $21.8 million, partially offset by increases in research and development expense of $9.0 million and selling, general and administrative expense of $3.1 million

For the full fiscal year 2024, AeroVironment expects revenue of between $700 million and $710 million, net income of between $51 million and $55 million, Non-GAAP adjusted EBITDA of between $122 million and $127 million, earnings per diluted 

With double-digit revenue growth expected in fiscal year 2025, AeroVironment is well-positioned for continued growth and success. Investors and analysts should keep a close eye on the company's ability to efficiently and timely integrate acquisitions, obtain and retain government contracts, adapt to changes in government spending, and react to changes in demand for its products and services. Additionally, the company's activities in response to competitive pressures, regulatory environment changes, and general economic and business conditions in the United States and worldwide will be crucial factors to consider.