AeroVironment (NASDAQ:AVAV) shares climbed sharply Tuesday after the company reported robust fiscal fourth-quarter earnings, but the stock gave back much of its early gains as investors focused on the funded backlog and margin details. The defense and drone technology firm closed at $165.07, up 18.8% on the day, after opening at $176.50 and touching an intraday high of $178.50. Volume surged to 7.98 million shares, more than five times the average daily turnover. In after-hours trading, the stock edged slightly higher to $165.55.
The broader market also rose, with the Nasdaq Composite adding 1.5% to 26,213.72, the S&P 500 gaining 0.8% to 7,499.36, the Dow Jones Industrial Average rising 0.3% to 52,319.20, and the Russell 2000 increasing 0.5% to 3,024.37. AeroVironment's outperformance was notable, but the closing price below the opening level signaled caution among traders.
For the fiscal fourth quarter, AeroVironment reported revenue of $641.6 million, a 133% year-over-year increase, driven largely by acquisitions. The company's full-year revenue soared 141% to $1.98 billion. Non-GAAP earnings per share came in at $1.84, topping the consensus estimate of $1.47 tracked by Google Finance. Revenue also exceeded the $559.09 million analyst forecast.
However, the earnings report revealed a mixed picture. Product sales remained the primary revenue driver, accounting for $499.0 million, or 78% of total revenue, down from 88% in the prior-year period. Contract services swung to a gross loss of $9.2 million, compared to a gross profit of $8.9 million a year ago, resulting in a negative gross margin of 6.4%. Total gross margin contracted to 32% from 36% in the same quarter last year.
Acquisitions played a significant role in the quarter's results. BlueHalo and Empirical Systems Aerospace contributed $282.3 million in revenue, representing 44% of the total. The company's funded backlog stands at $1.2 billion, which is approximately 55% of the midpoint of its fiscal 2027 revenue guidance range.
Looking ahead, AeroVironment provided fiscal 2027 revenue guidance of $2.125 billion to $2.225 billion, with a midpoint of $2.175 billion. GAAP EPS is expected to be between $0.16 and $0.48, while non-GAAP EPS is forecast at $3.02 to $3.34. CEO Wahid Nawabi described fiscal 2026 as the company's 'strongest financial performance' and emphasized the company's ability to 'deliver at speed' while focusing on strengthening the supply chain.
Analyst reactions were largely positive but not unanimous. Over the past three months, eight analysts rated the stock a Buy and one a Hold, with an average 12-month price target of $217.63. UBS analyst Gavin Parsons maintained a Hold rating with a $166 target, close to the current share price. Wedbush analyst Sam Brandeis initiated coverage with a Buy and a $250 target.
There is also a potential legal overhang. Bleichmar Fonti & Auld announced Tuesday that a securities fraud class action lawsuit is pending in the U.S. District Court for the Eastern District of Virginia, related to comments about the Space Force SCAR program. The lead plaintiff deadline is July 27. The complaint currently contains only allegations.
AeroVironment is scheduled to hold its investor day in New York on July 8, with management presentations beginning at 8:30 a.m. EDT.
