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What Do AeroVironment’s New Risk Factors Mean for Fiscal 2022
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What Do AeroVironment’s New Risk Factors Mean for Fiscal 2022

AeroVironment (AVAV) provides technology solutions in areas such as robotics, sensors, connectivity, and software analytics. Its customers include government and commercial entities.

Earnings and Guidance

The company recently reported strong Fiscal 2021 results and issued Fiscal 2022 guidance. For Fiscal 2021 ended April 30, AeroVironment reported an 8% year-over-year increase in revenue to $394.9 million. It recorded growth in both product sales and service revenue. Adjusted EPS jumped to $2.10 from $1.84 in the previous year.

AeroVironment CEO Wahid Nawabi commented, “Our team again delivered record fourth quarter and full fiscal year 2021 revenue, representing a fourth consecutive year of profitable topline growth.” (See AeroVironment stock charts on TipRanks).

AeroVironment’s funded backlog at the end of the period stood at $211.8 million, compared to $208.1 million at the end of the previous fiscal year. The company expects to report Fiscal 2022 revenue in the range of $560 million – $580 million, and projects adjusted earnings in the range of $2.50 – $2.70 per share.

AeroVironment Risk Factors

According to the new Tipranks Risk Factors tool, AeroVironment’s primary risk category is Legal and Regulatory, accounting for 25% of the 55 risks identified. Finance and Corporate and Production are the next two major risk factor categories at 22% each.

In its latest earnings report released on June 29, the company added four new risk factors since its April report.

With fewer than 1,500 employees, AeroVironment is currently classified as a small business defense contractor. The loss of that status may hurt the company’s ability to compete for U.S. government contracts reserved for small businesses.

AeroVironment has identified the proposal to increase the U.S. corporate income tax rate to 28% from 21%, and the imposition of a 15% minimum tax on worldwide income as risks likely to negatively impact its earnings and cash flow.

The company entered into a credit arrangement with various lenders in connection with its acquisition of Arcturus. It says defaulting on its credit obligations could adversely impact its financial position and operating results.

Another risk that AeroVironment has highlighted is that a drop in government budgets or delays in contract awards may adversely impact its future revenue.

The sector average Legal and Regulatory risk factor is at 14.8%, compared to AeroVironment’s 25%. AeroVironment shares are up approximately 26% over the past year.

Analyst’s Take

Baird analyst Peter Arment recently reiterated a Buy rating on AeroVironment stock with a price target of $120. Arment’s price target suggests 22.14% upside potential. The analyst noted that AeroVironment’s core business still shows strong growth. Arment sees any weakness in the shares as a buying opportunity.

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