AeroVironment reports earnings today after the close, just as the stock trades near a buy point.
Analysts' consensus earnings estimate is $1.38 a share, representing a year-over-year increase of 221%, according to FactSet. If that estimate holds up, it would break a streak of four straight declining quarters.
Sales for the April-ended quarter are expected to climb 23% to $241.5 million. That follows sales increases of 6%, 24% and 4%, plus a 10% drop in the January-ended quarter.
In March, quarterly results missed views because California wildfires affected factory operations, and President Donald Trump showed wavering support for Ukraine. In a Dec. 4 quarterly report, earnings missed views due to higher costs.
Although earnings estimates have trended lower the past few months, analysts remain favorable on AeroVironment stock. Of nine who cover the company, eight have buy or overweight ratings. The other analyst has a hold recommendation, per FactSet data.
Drone Maker's Advantage
AeroVironment is not a leader in the aerospace and defense industry group. Its Composite Rating of 85 is below the 90 normally associated with leading stocks, and leaves it about the middle among 73 stocks in the group, according to IBD Stock Checkup.
Yet, the Arlington, Va.-based company is in the middle of an unshakable trend in warfare, namely the increasing use of drones as munitions and as electronic sensors. Its product lineup includes systems for land, sea, air and space operations.
One of its most celebrated products is the Switchblade, a flying drone that's first used to look for targets and then is sent to a chosen target with an explosive payload. The weapon has been a battlefield success in Ukraine. Its Puma drones also have seen heavy use by Ukrainian forces.
This year, AeroVironment introduced the P550, which can quickly switch from reconnaissance to attack mode. It can stay aloft for up to five hours.
AeroVironment competes against other defense contractors such as Kratos Defense & Security Solutions who also make drones. On June 13, another rival went public: AIRO Group Holdings priced at $10 a share in its initial public offering and climbed as high as 39.07. Today, the drone company trades around 24.50.
Drone Maker's Stock Recovering
AeroVironment stock is recovering from a 57% decline from its all-time peak in November to a low in April. A handle is forming with a 202.74 buy point. The stock is also near another entry at 188.79. The Accumulation/Distribution Rating of A points to growing institutional demand during the stock's rebound.
AeroVironment stock has a 21-day average true range (ATR) of 4.48%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
