Motley Fool Rule Breakers recommendation AeroVironment (NASDAQ:AVAV) has blazed a trail of success since it burst upon the public markets some two years ago. Seven quarters reported; seven "earnings beats." Anyone think it won't skate a perfect figure eight? We'll find out tomorrow, when fiscal Q2 2009 earnings come out.

What analysts say:

  • Buy, sell, or waffle? AeroVironment (AV) has picked up a couple new buy ratings since last quarter. Recommendations now total six buys and eight holds.
  • Revenue. On average, analysts predict 19% sales growth, to $63.9 million.
  • Earnings. Profits are predicted to rise 12% to 0.27 per share.

What management says:
Of course, beating such expectations is becoming a bit of a habit at AV -- but don't blame management for lowballing. They've stuck consistently to their long-term guidance, predicting 20% to 25% revenue growth in fiscal 2009, and operating margins in the 12% to 14% range.

What management does:
If it meets that mark (and as you can see below, that seems likely), AV will remain more profitable per revenue dollar than almost any major defense contractor. Textron and United Technologies (NYSE:UTX) fly close formation with AV, earning operating margins in the 13% range. Raytheon (NYSE:RTN) and Lockheed Martin (NYSE:LMT) lag behind in the 11% band, while both Boeing (NYSE:BA) and Northrop Grumman (NYSE:NOC) are still pulling down only single-digit operating margins.

Margins

4/07

7/07

10/07

1/08

4/08

8/08

Gross

39.4%

38.3%

37.3%

36.9%

36.4%

37.4%

Operating

16.3%

16.2%

14.9%

12.2%

13.2%

14.0%

Net

11.9%

12.1%

11.7%

10.2%

9.9%

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:
Over the past couple of years, tiny AV seems to have secured its place among the stars of the defense industry. It's winning unmanned aerial vehicle contracts right and left -- but what will AV do for an encore?

Management may have answered that question in September with the announcement that it's expanding operations in the industrial sphere in cooperation with Toyota Motor (NYSE:TM). Best known for its cars, the Japanese automaker also happens to be the largest manufacturer of forklifts in the U.S., and will now be offering AV's Posicharge vehicle-battery chargers through its own Toyota Material Handling subsidiary.

While the middle of a recession may not have been the most propitious time to expand industrial operations, in the long term, the move could hold real promise. Personally, as much as I enjoy reading about AV's military equipment successes every quarter, I'll really be looking forward to tomorrow's word on how the Toyota venture is working out.

In the market for news on all things UAV? Go wild:

Fool contributor Rich Smith owns shares of AeroVironment and Boeing. At The Motley Fool, we take our disclosure policy seriously.