This Defense Tech Innovator Just Crushed Earnings: What's Next?

Stifel analyst Jonathan Siegmann reiterated the Buy rating on AeroVironment, Inc. AVAV on Wednesday with a price forecast of $240.

The company released its fourth-quarter results after Tuesday’s closing bell. AeroVironment reported quarterly earnings of $1.61 per share, which beat the $1.42 analyst consensus estimate.

Quarterly revenue came in at  $275.05 million, beating the Street estimate of $242.69 million.

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The analyst reiterated a Buy rating on AeroVironment, citing its strong positioning as a pure-play next-gen defense tech firm with accelerating sales and earnings, which he predicts to fuel investor interest and support multiple expansions.

In the recently reported quarter, Siegmann noted that the outperformance was entirely due to stronger-than-expected Loitering Munitions, or LMS, revenue of $138 million, well above their $95 million forecast.

Following the update, management issued the fiscal year 2026 guidance, which aligned with Siegmann’s earlier projections and the previously filed S-4.

The analyst also viewed the planned acceleration in capital expenditure spending positively, expecting investors to increasingly favor organic growth efforts in next-gen defense technology.

Adjusted EBITDA of $62 million (22.4% margin) surpassed Siegmann’s estimate of $53 million (22.5%) and the $55 million consensus (22.7%). The beat was mainly due to stronger revenue and lower SG&A and R&D costs as a percentage of sales, though partially offset by a lower gross margin of 39.5% versus the expected 42.0%.

Siegmann also noted that fourth quarter adjusted EBITDA was higher than all but four of the company’s annual EBITDA results since fiscal year 2025.

On the earnings call, analysts questioned the sharp 48% quarter-over-quarter drop in the company’s unfunded backlog.

Management explained this was tied to the expiration of an Army IDIQ contract under PEO Missiles & Space for Switchblade drones.

The Army has since shifted procurement to a different IDIQ contract managed by PEO Soldier.

According to the analyst, all Switchblade-related obligations in the current U.S. government fiscal year have come through the PEO Soldier contract, highlighting continued demand under the new vehicle.

The recent merger with BlueHalo expands the company’s footprint into key defense areas like space, counter-drone systems, and missiles, core priorities for the Department of Defense.

Siegmann expects a sharp increase in organic EBITDA contributions from both the legacy AeroVironment business and the newly added BlueHalo operations.

Price Action: AVAV shares are trading higher by 21.6% to $234.97 at last check Wednesday.

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