AeroVironment Erupts On "Asymmetric Warfare Boom"

AeroVironment shares surged the most in nearly two decades in early trading after the defense contractor - best known for its loitering munitions and unmanned systems - reported stronger-than-expected fourth-quarter results and issued fiscal 2027 revenue guidance that topped Wall Street estimates tracked by Bloomberg.

AeroVironment's fiscal fourth-quarter revenue jumped 31% to $642 million, well ahead of the Bloomberg Consensus estimate of $556.4 million, driven mostly by its autonomous systems unit and soaring demand for Switchblade, Red Dragon, and Titan.

Switchblade

Adjusted EBITDA of $140.1 million and adjusted earnings of $1.84 per share also beat expectations. Initial fiscal 2027 guidance was broadly in line, with revenue projected at $2.125 billion to $2.225 billion, implying about 10% organic growth.

A quick look at AeroVironment's fourth-quarter earnings, courtesy of Bloomberg:

• Revenue $641.6 million vs. $275.1 million y/y, estimate $556.4 million
• Adjusted EPS $1.84 vs. $1.61 y/y, estimate $1.41
• Income from operations $56.9 million vs. $13.8 million y/y, estimate $39.4 million
• Adjusted Ebitda $140.1 million vs. $61.6 million y/y, estimate $126.1 million
• Gross profit $202.6 million vs. $100.3 million y/y, estimate $175.6 million

... and 2027 year forecast:

• Sees revenue $2.13 billion to $2.23 billion, estimate $2.16 billion (Bloomberg Consensus)
• Sees adjusted EPS $3.02 to $3.34, estimate $3.79
• Sees adjusted Ebitda $305 million to $325 million, estimate $346.2 million

Stifel analysts noted AeroVironment's strength in the drone and counter-drone space:  

AeroVironment is a leader in several key areas in new defense, namely loitering munitions (Switchblade family of drones) that we believe will be critical as the entire industry undergoes a transformation.

The company's merger with BlueHalo provides exposure in space, counterdrone, and missiles, all of which are priorities for the DoD.

We anticipate a steep ramp in organic EBITDA in the legacy AVAV portfolio and BlueHalo.

Our Buy rating reflects AeroVironment's positioning as a pure-play new defense tech company with rapidly growing sales and earnings driving increased investor enthusiasm and multiple expansion.

Bloomberg Intelligence analyst Will Lee noted:

AeroVironment's fiscal 2027 sales targets seem achievable, fueled by expectations of robust demand across its loitering munition, drone and counter-drone, or C-UAS, portfolio. Still, sales are skewed toward 2H, and US budget delays might push them further out into 2028.

KeyBanc Capital Markets analyst Michael Leshock noted:

AeroVironment is positioned to capitalize on the proliferation of UAS/cUAS and increased government spending in defense and space-related programs. Should geopolitical tensions intensify, AVAV is positioned among the top beneficiaries.

In early trading, AeroVironment shares were up nearly 31%, which would mark the stock's largest one-day gain on record if the move holds into the cash session. Year to date, shares are down 42.5% as of Monday's close. Short interest remains elevated, with about 13% of the float sold short, equivalent to roughly 4.8 million shares.

Perfect timing on AeroVironment. We recently laid out for readers how to capitalize on the accelerating "asymmetric warfare boom," a theme that appears poised to gain momentum in the quarters ahead. Read the full note here.