AeroVironment’s stock took off in the past year (2023: +47%) as it was fueled by geopolitical uncertainties. Solid growth, coupled with several major contracts, brought joy to investors.

As one of the leaders in unmanned aircraft systems, AeroVironment is a global leader in the production of unmanned aircraft systems. The company provides reconnaissance data and support to the US military and allied forces, as well as assistance in fighting wildfires and analyzing pollutants. In addition, unmanned aircraft systems are also used in the civilian sector, such as monitoring pipelines and searching for missing persons.

In addition, the company also operates in the EV Charging Solutions (electric vehicle charging stations), Industrial EV Systems (electric mobility in industry), Power Cycling & Test Systems (test systems for power supply in hybrid and electric vehicles), and Engineering Services (design and development of batteries for electric vehicles). AeroVironment was founded in 1971 and is headquartered in Monrovia, USA.

Quarterly revenue up 62%: Rising defense spending boosts business In the past second quarter (Note: AeroVironment’s quarter ended on October 31), the company saw a 62% increase in revenue to $180.8 million. This was $10.31 million above analyst forecasts (Source: Seeking Alpha).

The revenue increase was due to a higher product revenue of $83.4 million, partially offset by a lower service revenue of $14.2 million. In terms of segments, the increase over the previous year was attributed to a 115% increase in revenue from unmanned systems („UMS“), partially offset by declines of 6% at MacCready Works („MW“) and 3% at Loitering Munitions Systems („LMS“).

According to the company, systems are currently being used to support the conflict in Ukraine. AeroVironment manufactures the Switchblade 300 and Switchblade 600, both equipped with cameras, navigation systems, and guided explosives. The weapons can be programmed to automatically attack targets miles away, or they can hover over a target until activated by an operator to attack.

Profitability significantly better than expected Margins also performed much better than expected. Adjusted earnings of 97 cents per share were recorded. This was not only significantly higher than the previous year’s quarter (Q2 2022: 0.01 cents per share), but also 36 cents above analyst forecasts.

Order books filled – one major order after another By the end of the quarter, the funded order backlog stood at $487 million. Since then, additional orders have been secured: In mid-December, AeroVironment announced a major contract with the US Navy for $16 million to support video analysis and computer vision research.

At the start of the year, a $32.07 million contract from the US Army for additional Puma units (small drones) and related training services followed.

Management raises outlook With the release of its financial results, the company raised its outlook once again: AeroVironment now expects revenue between $685 and $705 million (previously: $645 and $675 million). Adjusted net profit is expected to be between $2.46 and $2.70 per share (previously: $2.30 to $2.60 per share). This puts the stock currently at a price-earnings ratio between 46 and 51.