AeroVironment (AVAV) Clinches $20.6M Deal for Switchblade 300

AeroVironment, Inc. AVAV clinched a contract for the procurement of Switchblade 300 tactical missile systems. The deal was awarded by the U.S. Army Tactical Aviation and Ground Munitions.  

Valued at $20.6 million, the missile systems are expected to be delivered by July 2023.

Significance of Switchblade 300

The combat-proven Switchblade 300, with a patented wave-off feature, is the ideal loitering missile for use against beyond-line-of-sight targets. Moreover, due to its backpackable and rapidly deployable from air, sea or ground platform feature, Switchblade 300 delivers increased warfighter lethality with real-time GPS coordinates and video for precise targeting with low collateral effects.

Additionally, the Switchblade sensor to shooter combines the superior intelligence, surveillance and reconnaissance capabilities of AeroVironment’s small unmanned aircraft systems with the precision strike capabilities of the Switchblade loitering missile system.

Due to Switchblade 300’s remarkable features, AeroVironment may witness a steady inflow of orders involving the missile. The latest contract win is an example of that. Such contract wins should bolster AVAV’s revenues from the missile line of business.

Growth Prospects

The demand for modernized defense arsenals and ammunition is gaining momentum due to the evolving defense landscape. Hence, the demand for technologically advanced missiles can be expected to increase manifold due to their growing importance in strategic deterrence.

Per the reports from Mordor Intelligence, the missiles and missile defense system market is expected to witness a CAGR of more than 4.9% over the 2022-2027 period. Such growth prospects entail growth opportunities for AeroVironment to capitalize on the increasing demand.

Other defense participants that enjoy a strong position in the missile market and stand to benefit from the intensifying demand are as follows:

Northrop Grumman NOC is a prominent developer of missile systems and counter systems, including strategic deterrents, and subsystems and components. To strengthen its position in the missile market, Northrop acquired Orbital ATK in 2018, which used to be one of the industry leaders in providing missile components across air, sea and land-based systems.

Northrop boasts a long-term earnings growth rate of 2.2%. NOC shares have returned 32.4% in the past year.

Raytheon Technologies’ RTX Missiles & Defense is a leading designer, developer, integrator, producer and sustainer of integrated air and missile defense systems. The unit serves as a prime contractor or major subcontractor on numerous missile and related programs with the U.S. Department of Defense.

Raytheon’s long-term earnings growth rate is pegged at 10.4%. The Zacks Consensus Estimate for RTX’s 2022 earnings suggests a growth rate of 9.6% from the prior-year reported figure.

General Dynamics’ GD Ordnance and Tactical Systems is the system integrator of the 2.75-inch Hydra-70 family of rockets. It produces composite rocket motor cases and launches tubes for tactical and strategic missiles.

General Dynamics boasts a long-term earnings growth rate of 10.2%. GD shares have returned 11.8% in the past year.

Price Movement

In the past three months, shares of AeroVironment have risen 4.8% against the industry’s decline of 7.5%.

Image Source: Zacks Investment Research

Zacks Rank

AeroVironment currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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