Market Overview

GlassHouse Accuses Aerojet Rocketdyne Of Deceptive Accounting

Share:
GlassHouse Accuses Aerojet Rocketdyne Of Deceptive Accounting
Related
82 Biggest Movers From Yesterday
66 Stocks Moving In Wednesday's Mid-Day Session
Earnings-Linked Buy Opportunity In Aerojet-Rocketdyne (Seeking Alpha)

Aerojet Rocketdyne Holdings Inc (NYSE: AJRD) stock traded lower Thursday after short seller GlassHouse Research accused the company of accounting shenanigans and misleading earnings reports.

GlassHouse alleges that Aerojet Rocketdyne has abused its percentage of completion accounting practices and prematurely added revenue from long-term contracts. Aerojet Rocketdyne adopted the ASU 606 revenue recognition policy at the beginning of 2018, and GlassHouse said the company’s backlog took a $587-million hit as a result; GlassHouse said Wall Street doesn’t seem to appreciate the impact this extraction will have on future sales.

The company has shown a troubling pattern of missed milestones, unbilled receivables and plummeting advanced payments in recent quarters, suggesting a poor-quality backlog and future earnings risk down the road, according to GlassHouse. 

Benzinga has contacted Aerojet Rocketdyne for comment on GlassHouse's allegations by phone and email. 

GlassHouse also alleges that two key reserve accounts, “reserve for overhead rate disallowance” and “contract loss provisions,” have been significantly underfunded by more than $30 million over the past two years, inflating the company’s earnings numbers by millions. 

“In order to mask true economic earnings which have faltered in recent periods, we believe management has underfunded some of its key reserves and capitalized recurring expenses,” GlassHouse said in its report.

When these accounting maneuvers are taken into consideration, GlassHouse’s sustainable earnings estimates suggest Aerojet Rocketdyne stock is overvalued, the short seller said. 

“Premium valuation erroneously based on faux earnings is unwarranted given the material long-term structural issues and near-term accounting risk." 

GlassHouse has a $14.50 price target for Aerojet Rocketdyne, which implies more than 51-percent downside from the stock’s current price.

Related Links:

PolarityTE's Stock Falls 30% After Citron Calls It A Fraud

Inogen Hit By Citron Report; Analyst Rebuttal Calls This 'An Excellent Entry Point'

NASA photo via Wikimedia. 

Latest Ratings for AJRD

DateFirmActionFromTo
Jan 2019Credit SuisseUpgradesNeutralOutperform
Aug 2018SunTrust Robinson HumphreyMaintainsBuyBuy
Oct 2017JefferiesDowngradesBuyHold

View More Analyst Ratings for AJRD
View the Latest Analyst Ratings

Posted-In: Citron Research GlassHouse ResearchAnalyst Color Short Sellers Short Ideas Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (AJRD)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
MDRXKeyBancUpgrades0.0
ANETNomuraUpgrades260.0
CNPRBC CapitalUpgrades34.0
FISVOppenheimerUpgrades88.0
FNDUBSUpgrades37.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Afternoon Market Update: Schmitt Industries Rises Following Strong Q4 Results; Resources Connection Shares Slide

'Like A 1950's Black-And-White Fuzzy TV': How One Fintech Startup Completely Changed The Way We Think About Risk