Al Root

Shares of AeroVironment plunged after the defense technology company reported weaker-than-expected earnings for its fiscal second quarter on Wednesday evening.

AeroVironment stock was down 12% at $173.02 while the S&P 500 and Dow Jones Industrial Average were both flat.

For the quarter, the company reported earnings per share of 47 cents from sales of $189 million. Wall Street was looking for 76 cents and $182 million, respectively.

William Blair analyst Louie DiPalma called results "mixed" in a Thursday report, noting lower revenue from sales of the Puma, AeroVironment's reconnaissance drone, to Ukraine.

Sales of uncrewed systems, including Puma, dropped 36% from a year earlier. Overall sales grew 4% year over year thanks to growing sales of "loitering munitions," weapons that can stay in the air for a while and be guided to hit specific targets.

DiPalma rates shares Buy and doesn't have a price target for the stock. A Buy rating at Blair essentially means the firm expects the stock to outperform the market.

"Management does not expect Ukraine to be a significant headwind in the second half of the year," wrote DiPalma, adding that the pipeline for sales of reconnaissance systems looks strong.

"The company conveyed that it has been working to diversify away from Ukraine, and has been successful in doing that," said DiPalma. Its total backlog of orders is up to about $2.3 billion, up from closer to $400 million at the end of July. New wins for the company's loitering munition system, called SwitchBlade, boosted the total.

Coming into Thursday trading, AeroVironment stock was up about 56% year to date.

A strong stock performance also means investor expectations headed into any earnings report are high. Failing to meet those expectations is another reason for the early drop.

Overall, not much seems to have changed with the results. Looking ahead, the company maintained a full-year forecast for sales of $790 million to $820 million, while the consensus call on Wall Street is for $816 million.

Management told investors to expect EPS of between $3.18 and $3.49. The consensus call on Wall Street is for $3.42.

Write to Al Root at allen.root@dowjones.com

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December 05, 2024 10:20 ET (15:20 GMT)

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