Al Root

Shares of defense contractor AeroVironment fell sharply late Tuesday after the company gave a weak quarterly update.

Ukraine and, surprisingly, the California wildfires were two reasons for the disappointment. The company manufactures in California.

For its fiscal third-quarter ended Jan. 25, the company reported an operating loss of $3.1 million, down from a profit of $14.3 million a year ago. Wall Street was looking for a $14 million profit.

Quarterly sales dropped 10% to $167.6 million. Wall Street was looking for $192 million.

"We faced a number of short-term challenges in the third quarter, including the unprecedented high winds and fires in Southern California, which impacted our ability to meet our goals," said CEO Wahid Nawabi in a news release. "Nevertheless, we made significant progress towards executing our long-term growth strategy and building resiliency for the future."

Backlog ended the quarter at a record $764 million.

The backlog was positive, but guidance was cut. The company expects full-year sales to be about $788 million, down from about $810 million in prior guidance. Wall Street was looking for $820 million.

Earnings per share should be about $3.03, roughly 30 cents lower than guidance given in December. Wall Street was looking for $3.43.

AeroVironment stock fell 15.4% in after hours trading, to $120.01. Shares lost 0.5% in regular trading while the S&P 500 and Dow Jones Industrial Average fell about 1.2% and 1.6%, respectively.

Through Tuesday trading, AeroVironment stock was down about 35% since the Nov. 5 presidential election.

Fears about spending cuts spearheaded by the new administration have weighed on investor sentiment. President Donald Trump's wavering support for Ukraine hasn't helped AeroVironment stock either. It's a large supplier of guided munitions called " Switchblade" to the embattled country.

For the fiscal year ending April 30, 2024, Ukrainian sales amounted to about 38% of total revenue.

"This quarter, we booked record Switchblade and Jump-20 orders, which helped expand our backlog," added Nawabi. "While this has been a transition year pivoting away from Ukraine demand, we still expect a strong fiscal year 2025 including record fourth quarter revenue."

Jump-20s are drones.

Unmanned and intelligent bombs are good businesses these days. Full fiscal year sales of almost $800 million have roughly doubled since Russia invaded Ukraine. Still, the recent Ukraine-related volatility has made investors nervous.

Write to Al Root at allen.root@dowjones.com

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March 04, 2025 17:22 ET (22:22 GMT)

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