Why AeroVironment, Inc. (NASDAQ: AVAV) stock is rising

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AeroVironment, Inc. (NASDAQ: AVAV) stock rose over 3.6% on 4th March, 2020 (As of 10:08 am GMT-5; Source: Google finance) after the company posted decent results for the third quarter of FY 20. The company has delivered (Loss) income from continuing operations for the third quarter of fiscal 2020 of a loss of $1.1 million, which reflects the fall of 114% from third quarter fiscal 2019 income from continuing operations of $7.8 million. The decline in income from continuing operations was mainly due to a decrease in gross margin of $6.9 million and an increase in research and development expense of $3.3 million, which was partially offset by a decrease in selling, general and administrative expense of $1.2 million. As of January 25, 2020, funded backlog was $126.0 million compared to $132.5 million as of January 26, 2019.

AVAV in the third quarter of FY 20 has reported the adjusted loss per share of 1 cents, missing the analysts’ estimates for the adjusted earnings per share of 17 cents, according to Zacks Investment Research. The company had reported 18 percent decline in the adjusted revenue to $61.9 million in the third quarter of FY 20, missing the analysts’ estimates for revenue of $69.9 million. The decline in revenue was mainly due to a fall in product sales of $13.6 million.

Gross margin for the third quarter of fiscal 2020 was $23.5 million, which represents a contraction of 23% from third quarter fiscal 2019 gross margin of $30.4 million. The decline in gross margin was on the back of a decrease in product margin of $7.8 million, which was partially offset by an increase in service margin of $1.0 million. As a percentage of revenue, gross margin has contracted to 38% from 40%. The decline in gross margin percentage was mainly driven by an increase in intangible asset amortization expense associated with the acquisition of Pulse Aerospace in June 2019 and a decrease in product revenue.

For fiscal 2020, the Company expects to generate revenue in the range of $350 million and $370 million. The Company has revised its expectations and now expects to generate non-GAAP earnings per diluted share in the range of $1.67 and $1.87. This financial guidance assumes about 7% ownership of the HAPSMobile joint venture and includes the expected losses of Pulse Aerospace, which the Company acquired on June 10, 2019.

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