Aerospace and defense company AeroVironment (NASDAQ:AVAV) will be reporting earnings tomorrow after the bell. Here’s what investors should know.

AeroVironment beat analysts’ revenue expectations by 4.4% last quarter, reporting revenues of $188.5 million, up 4.2% year on year. It was a softer quarter for the company, with a significant miss of analysts’ adjusted operating income estimates.

Is AeroVironment a buy or sell going into earnings? Read our full analysis here, it’s free.

This quarter, analysts are expecting AeroVironment’s revenue to be flat year on year at $188.2 million, slowing from the 38.8% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $0.66 per share.

Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. AeroVironment has a history of exceeding Wall Street’s expectations, beating revenue estimates every single time over the past two years by 7.7% on average.

Looking at AeroVironment’s peers in the defense contractors segment, some have already reported their Q4 results, giving us a hint as to what we can expect. Mercury Systems delivered year-on-year revenue growth of 13%, beating analysts’ expectations by 23.9%, and CACI reported revenues up 14.5%, topping estimates by 3.4%. Mercury Systems traded up 18.3% following the results while CACI was down 9.3%.

Read our full analysis of Mercury Systems’s results here and CACI’s results here.

Valuation multiples for many growth stocks have not yet reverted to their early 2021 highs, but the market has been optimistic as of late due to a soft landing. This is an economic situation where rate hikes successfully quelled inflation but did not send the economy into a recession. Furthermore, recent rate cuts and Donald Trump's triumph in the 2024 Presidential election have been tailwinds for the market, and while some of the defense contractors stocks have shown solid performance, the group has generally underperformed, with share prices down 4.8% on average over the last month. AeroVironment is down 12.1% during the same time and is heading into earnings with an average analyst price target of $226.74 (compared to the current share price of $152.10).

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