Tomorrow will mark an anniversary of sorts for AeroVironment
What analysts say:
- Buy, sell, or waffle? Of the nine professional stock pickers who watch AV, five rate the stock a buy, while the other four say "hold."
- Revenue. On average, they expect to see Q4 sales rise 17% to $59.3 million.
- Earnings. Profits, however, are predicted to flatline at $0.27 per share.
What management says:
AeroVironment promised last quarter to deliver full-year sales growth of somewhere between 20% and 25%, and to earn 12% to 14% operating margins thereon. When last we heard from management, they were sticking to that story. Crunching a few numbers, we therefore come to the conclusion that management foresees reporting about $213 million in fiscal year revenue, and generating perhaps a skosh under $28 million in operating profit.
What management does:
Curiously, year to date, management has racked up $151 million in sales, and $19 million in operating profit. While the analysts don't make public their estimates of operating earnings (or at least the major data aggregators like Yahoo! don't publish these estimates), we can still see that Wall Street is looking for just $210 million in revenue this year -- undershooting the midpoint on AV's own prediction by $3 million. Meaning that either the analysts know something management does not, or else AV's getting set up to "beat estimates" next week.
On the other hand, if you look at how margins have been trending, there may be some cause for the analysts' pessimism. If AV is to achieve its targeted midpoint of 13% operating profit, it will need to halt the slide we see below.
|
10/06 |
1/07 |
4/07 |
7/07 |
10/07 |
1/08 |
|
|---|---|---|---|---|---|---|
|
Gross |
40.4% |
40.2% |
39.4% |
38.3% |
37.3% |
36.9% |
|
Operating |
12.2% |
15.9% |
16.3% |
16.2% |
14.9% |
12.2% |
|
Net |
7.1% |
9.5% |
11.9% |
12.1% |
11.7% |
10.2% |
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
On the other hand, it's worth noting that even at current levels, AV generates operating profit margins higher than many larger rivals in the UAV space. L-3
Key to AV's success, I suspect, is its "hit 'em where they ain't" product strategy. By avoiding the competitive midsize UAV space, and focusing instead on superlarge, stratospheric flying robots; smaller, "model airplane" scale units; and, most recently, a foray into the sci-fi field of flying mechanical bugs, AV may well be able to avoid the competitive pricing pressure that can be death to profit margins.
Tune in next week for a status report on how well that's working for AV.
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