What happened

Shares of AeroVironment (AVAV -0.92%) traded down more than 10% Wednesday following the release of the company's fiscal fourth-quarter report. Earnings came in ahead of expectations, but the markets appear more focused on a light top-line number.

So what

AeroVironment, a maker of small to mid-sized drones for military and commercial users, reported fiscal fourth-quarter earnings of $1.04 per share, easily topping the $0.81 analyst consensus. But revenue came in at $136 million, about $11 million short of consensus.

An AeroVironment drone in action, launched by military personnel.

Image source: AeroVironment.

The company has been in expansion mode of late, closing two acquisitions in the now-completed quarter and adding a third in May. Among the deals was a $400 million purchase of Arcturus, which should significantly expand its addressable market by adding larger drones to the portfolio.

"Our team again delivered record fourth quarter and full fiscal year 2021 revenue, representing a fourth consecutive year of profitable topline growth," CEO Wahid Nawabi said in a statement. "In addition to producing solid financial and operational results despite the continued macroeconomic challenges our industry and economy are experiencing, we expanded our total addressable markets with the strategic acquisitions."

On the company's post-earnings call, Nawabi attributed the revenue miss to pandemic-related "specific minor issues" in the supply chain that "caused some delays" in some deliveries.

Now what

AeroVironment said it expects to generate revenue of between $560 million and $580 million in its fiscal 2022, and earnings between $2.50 and $2.70 per share. Analyst consensus is within those ranges, with the Street right now expecting earnings of $2.64 per share on revenue of $571 million.

AeroVironment might not have knocked the cover off the ball with its report, but I don't see anything that justifies this sell-off. Investors would likely have reacted more warmly had the guidance been stronger, but given the potential upside from the acquisitions and the Pentagon's growing appetite for drones there could be upside to fiscal 2022 estimates, and if nothing else there is a clear pathway for growth up ahead.