By Davit Kirakosyan
AeroVironment (NASDAQ:AVAV) shares jumped more than 9% intra-day today (currently up 4%) after the company reported its Q3 results, with revenue of $134.4 million (up 49% year-over-year) beating the Street estimate of $125.52M, primarily driven by growth in the Small UAS business (Puma drone) and the TMS (Switchblade) business, which were up approximately 185% and 29%, respectively.
EPS came in at $0.33, worse than the Street estimate of $0.41. Gross margin of 33.9% improved by 1,010 bps year-over-year and 1,070 bps sequentially, reflecting a much-improved mix of drone-related product sales within the mix, along with improved service margin.
For fiscal 2023, the company expects EPS in the range of $1.13-$1.33, compared to the consensus of $1.39. Revenue guidance was raised to $510-525M, compared to the consensus estimate of $516M.
Following the report, Canaccord Genuity raised its price target on the company to $115.00 from $106.00 while maintaining a Buy rating, highlighting the record funded backlog of $413.9M, representing an 83% year-over-year increase.
“Management stated that the huge backlog growth was being propelled by exceptional demand for Switchblade and Puma loitering munitions and ISR drones following the invasion of Ukraine. DoD is ordering new Pumas and Switchblades to arm Ukraine to fight Russia, while also working to backfill its mostly depleted inventories,” said Canaccord.
According to the firm, the backlog also reflects increased global demand for drones, though much of the TMS opportunity (such as Lithuania’s order of Switchblade 600 drones) is not yet counted. Management states that only 1/3 to 1/2 of the DoD aid package announcements have been added to the backlog so far.