What happened
Shares of drone and electric car charger manufacturer AeroVironment (AVAV 1.57%) jumped 29.7% last month, according to data provided by S&P Global Market Intelligence, after the company reported better than expected earnings for its fiscal first quarter. Revenue surged 21% to $43.8 million and net loss improved from $11.6 million a year ago to $4.5 million last quarter.
So what
There wasn't a lot to complain about with AeroVironment's quarter. Drone revenue was up 18.9% to $36.3 million, and electric vehicle charger sales jumped 31.3% to $7.5 million. Backlog also jumped from $78 million on April 30 to $85.3 million on July 29.
Image source: Aerovironment.
Management has been able to lower production costs, resulting in an increase in gross margin from 18% a year ago to 27% last quarter. And with a higher revenue base, that had the effect of driving a big improvement in the bottom line. For the fiscal year, management is expecting revenue in the $280 million to $300 million range with earnings of $0.45 to $0.65 per share.
Now what
AeroVironment has been playing the long game in drones, waiting for the market to grow from a phase defined by hype into a more realistic sales channel right now. With a number of drones that were developed for military use, AeroVironment has ideal products for new customers in applications such as border patrol, or farm or energy land monitoring. And in the EV charging business, the company has preferred-supplier agreements to provide in-home charging systems for a number of major automakers, and is seeing growing adoption of its TurboCords by OEMs.
Shares of AeroVironment are hot, and at as much as 100 times fiscal 2018 earnings guidance, they look pretty expensive. But if the company can continue growing in the booming drone and EV charging markets, the stock could have more room to run.
