AeroVironment’s Mixed Q3 Earnings Spark Stock Selloff
Thursday morning saw AeroVironment’s (NASDAQ: AVAV) stock plummet 15.6% after the company reported mixed Q3 earnings the previous night. Despite beating sales forecasts, the company’s profitability took a hit, leading to a decline in stock value.
Beating Sales Forecasts, But Missing Profit Expectations
Heading into the report, analysts predicted AeroVironment would earn $0.68 per share on sales of $181.4 million. While the company reported a quarterly revenue of $188.5 million, its EPS fell short at $0.47 per share.
Record Sales, But Profitability Slumps
AeroVironment’s sales grew 4% to set a new quarterly record, driven by the popularity of its “loitering munition systems.” CEO Wahid Nawabi attributed the strong revenue performance to the growing demand for these systems. However, the company’s gross profit margin fell 300 basis points to 39%, which Nawabi blamed on the higher loitering munitions sales.
GAAP Profits Tell a Different Story
When calculated according to generally accepted accounting principles (GAAP), the company’s profits took an even bigger hit. AeroVironment’s actual GAAP profits for the quarter amounted to only $0.27 per share, a decline of 59% year over year. This significant discrepancy is likely the primary reason behind the stock’s decline.
Guidance and Outlook
Management provided guidance for 2025 sales, expecting them to land between $790 million and $820 million, representing 12% year-over-year growth. However, they did not provide a projection for GAAP profits, only stating that pro forma profit should land between $3.18 and $3.49 per share. At the midpoint, this implies 11% growth year over year, which may fall short of analyst earnings forecasts.
Investors React
The mixed Q3 earnings and declining profitability have clearly spooked investors, leading to a selloff of AV stock. With back-to-back earnings misses, it’s no wonder investors are upset.
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