Ahead of the Bell: AeroVironment downgraded

Analyst downgrades AeroVironment to 'Neutral' on lower profit following 1st-quarter loss

• On 8:23 am EDT, Wednesday September 9, 2009

HARTFORD, Conn. (AP) -- A surprising first-quarter loss reported by AeroVironment Inc. prompted an analyst Wednesday to downgrade shares of the maker of unmanned aircraft on lower profit estimates.

Shares fell in premarket trading.

Janney Montgomery Scott analyst John M.A. Roy downgraded the Monrovia, Calif., company to "Neutral" from "Buy."

AeroVironment Inc. said Tuesday that revenue was hurt by the deferral of Raven unmanned aircraft systems deliveries because customers are waiting for new digital Raven systems and upgrade kits for existing aircraft, which are expected in the second half of the year.

Roy said he, too, is waiting for AeroVironment's digital data link, a digital, wireless video link.

"While we are believers in the long-term story for this stock, we see very limited upside at this point and are stepping aside to see what happens with the company's rollout of its DDL product," he said in a note to investors.

He reduced his fiscal 2010 estimate to $1.13 per share from $1.28 per share, including a higher estimate for the second half of the year to account for a backlog in digital data link shipments and retrofits. Roy cut his fiscal 2011 estimate to $1.63 per share from $1.80 per share.

AeroVironment said the results were in line with its expectations. However, Roy said investors were disappointed and he expects the stock to trade down in the near term.

"Customers have sent a clear signal that they are willing to wait for the Raven DDL product, as not a single analog Raven was shipped in the quarter," Roy said. "Clearly this places a tremendous amount of importance on the company's ability to execute on its anticipated DDL offering, which management affirmed is on track for the second half of 2009."

Jefferies and Co. analyst Howard A. Rubel maintained his "Hold" rating for AeroVironment in a client note Wednesday.

The transition to the digital product was expected, but its near-term financial impact was more significant than he estimated, Rubel said.

He cut his 2009 full year estimate $1.20 per share from $1.25 per share.

AeroVironment said it lost $3.6 million, or 17 cents per share, during the quarter ended Aug. 1. Analysts surveyed by Thomson Reuters had been expecting a profit of 12 cents per share on revenue of $51.9 million.

Shares fell $2.16, or 7.1 percent, to $28.26 in premarket trading.

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