What Happened?
Shares of aerospace and defense company AeroVironment (NASDAQ: AVAV) fell 16% in the morning session after the company reported weak third-quarter earnings. Its EBITDA significantly missed, and its EPS fell short of Wall Street's estimates. On the other hand, AeroVironment blew past analysts' revenue expectations. Its Services revenue also topped Wall Street's estimates. Overall, this quarter could have been better.
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What The Market Is Telling Us
AeroVironment’s shares are very volatile and have had 20 moves greater than 5% over the last year. But moves this big are rare even for AeroVironment and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 17.2% on the news that the company announced a 5-year $990 million contract with the U.S. Army to supply Lethal Unmanned Systems (LUS). The systems (LUS) will equip soldiers with the next generation of Loitering Munition Systems (also called SwitchBlade), which are like portable drones capable of targeting and destroying moving targets such as armored vehicles and tanks.
Brett Hush, AV's senior vice president and general manager of Loitering Munition Systems noted, "This latest contract underscores the unmatched maturity and effectiveness of our system, as well as AV's strategic positioning to rapidly produce and deliver these cutting-edge solutions to operators in the field."
Following the announcement, Baird analyst Peter Arment upgraded the stock's rating from Neutral to Buy, adding "This record five-year indefinite delivery, indefinite quantity contract from the U.S. Army will enable significant inventory levels of the SwitchBlade product."
AeroVironment is up 35.4% since the beginning of the year, but at $167.25 per share, it is still trading 28.9% below its 52-week high of $235.17 from November 2024. Investors who bought $1,000 worth of AeroVironment’s shares 5 years ago would now be looking at an investment worth $2,716.
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