Reduced military spending is still hampering results at AeroVironment (NASDAQ:AVAV), but a conflict brewing in Syria may show the company's value to the military.

Fiscal first-quarter revenue was down 25% to $44.1 million and the company lost $7.2 million, or $0.32 per share during the quarter. Product sales only fell slightly, but contract services dropped during the quarter, driven by an overall decline of 28% in Unmanned Aircraft Systems (AES) sales.

Military still pinching pennies
The military is still seeing value in unmanned aircraft, such as the Puma AE shown below. It just doesn't have the kind of money to spend that it once did. That penny-pinching forced AeroVironment's orders to be delayed in the last quarter -- but that trend may soon be turning around.

The company's backlog actually increased from $59.4 million on April 30 to $76.9 million on July 27. With conflict picking up in Syria, and likely little desire to put boots on the ground, unmanned aircraft could play a large role in that growing conflict as well.  

Courtesy AeroVironment,

Demonstrating the value of AeroVironment's unmanned aircraft, the Department of Defense announced today that it has ordered a total of $15.8 million in products and services related to Switchblade, effectively a self-destructing unmanned aircraft. According to Aerovironment, Switchblade is the first loitering weapon, offering "in-flight retargeting, target verification, and pinpoint delivery." The good think for investors is that it's also a one-time use item, because Switchblade is blown to smithereens upon reaching its target.  

Electric vehicles stuck in neutral
AeroVironment's other business -- electric vehicle chargers -- didn't struggle as much as its AES division, but sales still fell 10% to just $8.9 million last quarter. Electric vehicles are slowly becoming popular, but that's largely been driven by Tesla Motors, which uses a proprietary charger. So AeroVironment really needs to see greater EV sales from major manufacturers like Ford, GM, and Chrysler before its own sales pick up significantly. Betting on that is a risky proposition.

Foolish bottom line
From an investor's perspective, AeroVironment is still stuck in no-man's land. The company has interesting products that could turn into growth engines, but its end markets aren't ready to adopt them on a wide basis. That will keep a cap on the company's results, making the stock tough to buy; annual earnings are expected to be just $0.35 to $0.50. That's not a good enough value to jump onto until sales really start to pick up.