AeroVironment's (AVAV 4.78%) stock soared 30.5% in September, according to data provided by S&P Global Market Intelligence. The defense robotics and autonomous systems company delivered a strong quarterly earnings report, raised its earnings guidance, and signaled a strong trend in its growth trajectory.
AeroVironment had an eventful September
AeroVironment reported its first-quarter results (quarter-end Aug. 2) in early September. Reported revenue of $455.7 million beat the consensus estimate of $437.6 million, while adjusted earnings per share of $0.32 were just below the consensus estimate of $0.34. The quarterly results were the first to include its Blue Halo acquisition.
CEO Wahid Nawabi noted its record revenue and backlog across both the Autonomous Systems and Space, Cyber, and Directed Energy segments. Its funded backlog at the end of the quarter grew to $1.1 billion, up 47% quarter over quarter, while its unfunded backlog surged to $3.1 billion, up from $775 million at the end of April.
The unfunded backlog includes orders that do not obligate customers to purchase goods and services, but still provide insight into future demand. This backlog is expected to continue growing significantly during the second quarter, driven by new contracts in the pipeline.
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The company confirmed that BlueHalo was awarded a major $499 million, eight-year research and development contract for the Air Force's High-Performance Electromagnetic Spectrum Survivable Materials Advance Program. This program holds strategic significance due to the rise of electronic warfare and microwave attacks in both space and land domains.
AeroVironment also announced a nearly $240 million order for its long-haul laser communications terminals from an undisclosed customer, which plans to deploy the systems in orbit.
Finally, AeroVironment announced the successful delivery of the first two mobile counter-unmanned aircraft system prototype Laser Weapon Systems (Locust LWS) to the U.S. Army Rapid Capabilities and Critical Technologies Office, supporting the Army Multi-Purpose High Energy Laser (AMP-HEL) prototyping effort.
Following the positive news, Raymond James analysts raised their price target to $348 from $300 and maintained a strong buy rating. Bank of America initiated coverage with a buy rating and a $300 price target, citing "strong opportunities for growth."
AeroVironment is priced for growth
Looking forward, AeroVironment maintained its full-year revenue guidance of $1.9 billion to $2 billion. However, it did raise its earnings per share forecast significantly, moving it to $3.60-$3.70 from the previous range of $2.80-$3.00.
The stock is currently priced at 102 times management's projected earnings per share (EPS) for this year. Although this is expensive, the company's future growth prospects appear promising, given its strong backlog of orders, and investors are willing to pay up for that future growth.
