AeroVironment (AVAV 1.78%), in the spotlight recently because Ukraine is using its drones in its war with Russia, reported its fiscal fourth-quarter results after the market closed Tuesday, and the numbers came up short of expectations. Its shares lost altitude as a result, trading down by as much as 10% on Wednesday morning.
AeroVironment is an up-and-comer in the usually staid world of defense contracting. The Pentagon has included the company's small unmanned aircraft (UAVs) in its aid packages to Ukraine, and by most accounts, the systems are performing well in combat.
But the company failed to meet Wall Street's expectations in its most recent quarter. For the period that ended April 30, AeroVironment said it earned $0.29 per share on revenue of $132.6 million. The consensus among analysts had been for a profit of $0.39 per share on revenue of $135 million.
CEO Wahid Nawabi said that "ongoing macroeconomic challenges" had impacted results. Income from operations in the quarter totaled $13.0 million, down $4.8 million year over year due to lower margins.
"During the quarter, the company continued to face supply chain constraints and a tight labor market," Nawabi said.
The near-term picture is clouded by supply chain issues and a difficult labor market, but there is a lot to like about AeroVironment. The war in Ukraine has battle-tested its products and raised awareness of them, and management believes the Pentagon will replenish its drone inventory in the quarters to come.
AeroVironment stock is no bargain. It trades at a price-to-sales ratio of 4, while defense titans like Lockheed Martin, Northrop Grumman, and General Dynamics are trading at 2 times sales or less. But AeroVironment offers a clear trajectory for industry-beating growth in the quarters to come. Investors with long time horizons might want to consider this sell-off a buying opportunity.