Why AeroVironment Inc. Stock Is Flying High Today

Is this meaningful or just another movement?

Jul 9, 2014 at 2:14PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of AeroVironment (NASDAQ:AVAV) have surged 14% higher today following the release of the high-tech drone manufacturer's fiscal 2014 fourth-quarter earnings results.

So what: AeroVironment's 2014 fiscal year ended with a bang on April 30, as quarterly revenue shot 36% higher year over year to $73.5 million, pulling earnings up to a whopping $0.36 per share. Both figures trounced Wall Street's consensus, which had called for $69.6 million in revenue and $0.23 in EPS. This was driven largely by the quarter's 42% year-over-year surge in unmanned aerial vehicle sales, to $60 million.

AeroVironment also boosted its revenue guidance for fiscal 2015 from the earlier $230 million-$250 million to a new range of $250 million-$270 million. This comes in well ahead of the current Wall Street top-line consensus of $254 million, but a gross profit margin estimate of 34.5%-37.5% produces $93.6 million in gross profit. That's a bit weaker than 2014's realized gross margin of 37% (gross profit was $93.6 million for fiscal 2014on revenue of $251.7 million) when using the midpoints from both guidance ranges.

Now what: If we assume that AeroVironment will wind up with a similar distance between its gross and net margins next year as it did for fiscal 2014, it will collect roughly $13.9 million in net income, which represents earnings growth of only 1.5% over 2014. Its revenue guidance for fiscal 2015 also offers a weak 3.3% growth rate from 2014's revenue. That's still a long way from the high-water marks of the 2012 fiscal year, which saw AeroVironment post $325 million in annual revenue and $30 million in net income, for EPS of $1.36.

AeroVironment's P/E ratio has been stuck near all-time highs in the triple digits this year. Weak projected growth plus record-high valuations generally don't produce good returns going forward. Potential investors should probably avoid this stock for the time being.

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Alex Planes has no position in any stocks mentioned. The Motley Fool recommends AeroVironment. The Motley Fool owns shares of AeroVironment. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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