AeroVironment, an RBR50 company that specializes in unmanned aircraft systems (UAS), is flying high after reporting $69.2 million in revenue for its fiscal third quarter (Q3) of 2014. That marks a 47 percent increase from Q3 2013 revenue of $47.1 million for the Monrovia, Calif.-based company, which attributes the growth to increased sales in its UAS segment of $19.8 million and in its Efficient Energy Systems (EES) segment of $2.3 million.
AeroVironment reported $0.34 EPS for Q3 2014, beating the Thomson Reuters consensus estimate of $0.19 by $0.15. The company had revenue of $69.20 million for the quarter, compared to the consensus estimate of $64.96 million.
“During the third quarter we continued to execute on our strategic priorities successfully, delivering strong results with revenue up nearly 50 percent and a 100 percent increase in adjusted earnings per share on a year over year basis,” says Tim Conver, AeroVironment chairman and chief executive officer.
“We are confident that our strong customer relationships, diverse set of capabilities and well-established positions in high potential growth opportunities will advance our leadership in each of our target markets and enhance value for our shareholders.”
As of January 25, 2014, funded backlog (unfilled firm orders for which funding is currently appropriated to us under a customer contract) was $95.5 million compared to $59.4 million as of April 30, 2013.
Net income for the third quarter of fiscal 2014 was $11.2 million compared to net income for the third quarter of fiscal 2013 of $3.9 million.
Earnings per diluted share for Q3 2014 was $0.49 compared to earnings per diluted share for the third quarter of fiscal 2013 of $0.17.
Fiscal 2014 Year-to-Date Earnings
Revenue for the first nine months of fiscal 2014 was $178.2 million, down 4 percent from the first nine months of fiscal 2013 revenue of $186 million.
Income from operations for the first nine months of fiscal 2014 was $5.5 million compared to income from operations for the first nine months of fiscal 2013 of $9.8 million. The lower income from operations resulted from lower revenue, resulting in $11.3 million lower gross margin and higher SG&A expense of $1.5 million, offset by lower R&D expense of $8.5 million.
Net income for the first nine months of fiscal 2014 was $5.7 million compared to net income for the first nine months of fiscal 2013 of $11.2 million.
As for all of fiscal 2014, AeroVironment expects earnings of $0.35 to $0.50 per share, with revenues ranging between $230 million and $250 million. Analysts currently expect it to report full-year earnings of $0.27 per share on revenues of $246.26 million.
Drones Flying High
A couple developments on the drone front may be behind the increase for AeroVironment.
First, AeroVironment signed a deal in February 2014 with Lockheed Martin to work on AeroVironment’s Global Observer, a drone with a wingspan of 175 feet that stays in flight at 65,000 feet for a week.
RBR Insider: AeroVironment, Lockheed Drone Deal: What it Means for UAVs
The deal will focus on integrating Lockheed Martin mission systems, ground systems and technology with the Global Observer to build an atmospheric satellite system for surveillance, communication relays and remote sensing purposes.
Second, the Pentagon released its 2015 budget, and the Air Force’s Lockheed Martin-made U-2 spy plane, which has been in use since the 1950s, is being replaced by Northrup Grumman’s RQ-4 Global Hawk Block 30 UAV, representing a significant shift in the U.S. Air Force’s attitude towards UAVs and another step towards automated warfare.
RBR Insider: Global Hawk Drone Replaces U-2 Spy Plane: Here Comes Automated Warfare
Analyst Outlook
Stock analysts at Thomson Reuters/Verus upgraded AeroVironment on March 3, 2014 from a ?sell? rating to a ?hold? rating. Zacks downgraded AeroVironment on Feb. 26, 2014 from an ?outperform? rating to a ?neutral? rating.
Five analysts have rated the stock with a hold rating, according to the Mideast Times, and three have given a buy rating to the stock. The stock presently has a consensus rating of ?Hold? and an average target price of $22.82.
AeroVironment has a 1-year low of $16.98 and a 1-year high of $34.25. The stock?s 50-day moving average is $30.26 and its 200-day moving average is $26.73. The company?s market cap is $685.1 million.
New Partnership
AeroVironment also has a new partnership with CybAero, a Swedish developer of unmanned helicopters. AeroVironment converted one of its two loans and acquired an 8.5 percent stake, making it the largest CybAero shareholder.
The loan, which was issued more than one year ago as part of a larger business agreement between the companies, has been converted into 1,062,699 shares. Another convertible loan is in the name AeroVironment with the same terms.
“We are very pleased to AeroVironment has decided to convert one of their loans and become shareholders in CybAero,” says Mikael Hult, CEO CybAero. “We confidently look forward to closer cooperation with AeroVironment.”
Other income for AeroVironment’s Q3 2014 was $4.9 million compared to other income for Q3 2013 of $0.2 million. The increase in other income was primarily due to the increase in fair value of the conversion option in the amount of $4.7 million of its CybAero convertible bond investment.
