Markets

Why Shares of Aerojet Rocketdyne Are Up Today

What happened

Shares of Aerojet Rocketdyne Holdings (NYSE: AJRD) rocketed higher by 17% in Tuesday afternoon trading after the space propulsion specialist reported better-than-expected earnings. The company reported solid growth and a backlog that implies that growth can continue, causing the shares to blast off. 

So what

After markets closed Monday, the maker of rocket engines and other propulsion systems reported second-quarter adjusted earnings of $0.46 per share on sales of $512.4 million, besting analyst estimates for $0.42 per share in earnings on sales of $495 million.

The company benefited from increased sales into two key defense programs, the Guided Multiple Launch Rocket System and the Medium Range Ballistic Missile, which helped offset a separate program that was canceled last year.

An Aerojet Rocketdyne engine on a NASA launch pad

Image source: Aerojet Rocketdyne.

Sales were up 6% year over year, though the company's margin dropped to 14.9% from 16.2% on a shift in product mix. Aerojet Rocketdyne has generated free cash flow of $111.4 million so far in 2020, compared with $24.3 million in the first six months of 2019.

"Q2 2020 was a great quarter for Aerojet Rocketdyne," CEO Eileen Drake said in a statement.

Now what

The company closed the quarter with a backlog of future business worth $6.8 billion, an all-time high. That includes a recent NASA win to build rocket engines to support deep space exploration missions.

The worry surrounding Aerojet Rocketdyne in recent years is that the company will get squeezed by deeper-pocket rivals including Northrop Grumman and start-ups like SpaceX.

Shares of Aerojet Rocketdyne are still off more than 20% from highs reached back in February, but the company's unexpected strength in the quarter and strong backlog provide some evidence that there is plenty of business to go around. That was enough to propel the stock higher on Tuesday. 

10 stocks we like better than Aerojet Rocketdyne
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 tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Aerojet Rocketdyne 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 June 2, 2020

 

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

In This Story

AJRD

Latest Markets 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