Aerospace and defense company Redwire (NYSE: RDW) missed Wall Street’s revenue expectations in Q3 CY2025, but sales rose 50.7% year on year to $103.4 million. The company’s full-year revenue guidance of $330 million at the midpoint came in 21.9% below analysts’ estimates. Its GAAP loss of $0.29 per share was 93.3% below analysts’ consensus estimates.

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Company Overview

Based in Jacksonville, Florida, Redwire (NYSE: RDW) is a provider of systems and components used in space infrastructure.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Redwire grew its sales at an incredible 66.6% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Redwire’s annualized revenue growth of 12.5% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Redwire achieved a magnificent 50.7% year-on-year revenue growth rate, but its $103.4 million of revenue fell short of Wall Street’s lofty estimates.

Looking ahead, sell-side analysts expect revenue to grow 87.3% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and indicates its newer products and services will catalyze better top-line performance.

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Operating Margin

Redwire’s high expenses have contributed to an average operating margin of negative 24.4% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Analyzing the trend in its profitability, Redwire’s operating margin decreased by 14.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Redwire’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Redwire generated a negative 40.5% operating margin.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Redwire’s earnings losses deepened over the last four years as its EPS dropped 22.5% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Redwire’s low margin of safety could leave its stock price susceptible to large downswings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Redwire, its two-year annual EPS declines of 86.6% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Redwire reported EPS of negative $0.29, up from negative $0.37 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Redwire to improve its earnings losses. Analysts forecast its full-year EPS of negative $3.17 will advance to negative $0.38.

Key Takeaways from Redwire’s Q3 Results

We struggled to find many positives in these results. Its full-year revenue guidance missed and its revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 11.8% to $6.44 immediately after reporting.

Redwire didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.