Personal Finance

Why AeroVironment Stock Popped 14.5% Today

Drone firing rockets at a tank

What happened

Shares of AeroVironment (NASDAQ: AVAV) are soaring today, up 14.5% as of 12:25 P.M. EST after the manufacturer of drone aircraf t report ed a big earnings beat last night.

Expected to earn just $0.14 per diluted share for its fiscal Q3 2019, AeroVironment instead reported a profit of $0.35 per share on sales of $75.3 million.

Drone firing rockets at a tank

AeroVironment reversed a loss from the year-ago quarter. Image source: Getty Images.

AeroVironment reversed a loss from the year-ago quarter. Image source: Getty Images.

So what

AeroVironment's sales climbed 38% year over year, and the company expanded its gross profit margin by 700 basis points, to 40%. The company's profit, meanwhile, marked a reversal from its year-ago Q3 2018 loss. CEO Wahid Nawabi called the results outstanding, and predicted they will lay a "strong foundation for fiscal year 2020," now less than three months away.

If there was a downside to the news, it was that on the cash flow statement, AeroVironment now shows that it has generated almost no actual cash profit this year despite the strong GAAP earnings. Free cash flow (FCF) for the first three reported quarters of 2019 totals just $91,000 -- a steep decline from the $24.1 million in FCF that the company had generated by this point last fiscal year.

Now what

Whether or not free cash flow improves, AeroVironment management laid out a strong case for continued GAAP profitability as this fiscal year winds down. The company's latest guidance predicts that AV will end the year with between $300 million and $310 million in revenue, and will earn between $1.60 and $1.80 per diluted share.

The new numbers are about $0.30 ahead of previous management guidance, partly explained by the fact that AV says it will report a one-time gain of $0.26 a share from a litigation settlement.

10 stocks we like better than AeroVironment

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and AeroVironment wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of March 1, 2019

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends AeroVironment. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Personal Finance Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More