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Aerojet Rocketdyne (AJRD) Down 9.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Aerojet Rocketdyne Holdings (AJRD). Shares have lost about 9.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Aerojet Rocketdyne due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Aerojet Rocketdyne's Q4 Earnings Miss, Debt Declines

Aerojet Rocketdyne reported fourth-quarter 2018 adjusted earnings of 33 cents per share, which missed the Zacks Consensus Estimate of 36 cents by 8.3%. However, on a year-over-year basis, the bottom-line figure improved 43.5% from the year-ago quarter’s tally of 23 cents.

Barring one-time adjustments, the company reported GAAP earnings of 29 cents per share, reflecting a massive improvement from a loss of 71 cents incurred in the year-ago quarter. This upside can be attributed to lower cost of sales and increased operating income in the reported quarter.

For 2018, the company’s adjusted earnings came in at $1.93 per share, which exceeded the Zacks Consensus Estimate of $1.82 by 6%. The bottom line also improved 89.2% from the year-ago tally.

Operational Performance

In the quarter under review, the company’s revenues of $437.9 million declined 17.1% year over year and also missed the Zacks Consensus Estimate of $500 million by 12.4%.

For 2018, the company generated total revenues of $1.90 billion, which fell short of the Zacks Consensus Estimate of $1.96 billion by 3%. Nevertheless, the reported figure increased 5.3% from the prior-year number.

Aerojet Rocketdyne’s total backlog at the end of 2018 totaled $4.1 billion, lower than $4.6 billion registered at the end of 2017. Of this, funded backlog amounted to $1.9 billion compared with $2.1 billion at 2017-end.

Total operating expenses declined 20.2% to $383.2 million in the fourth quarter. Meanwhile, operating income of $54.7 million improved a solid 14% from $48 million a year ago.

Segmental Performance

Aerospace & Defense: Revenues at this segment declined 17.4 % year over year to $434.9 million. The metric was impacted by the adoption of new revenue recognition guidance effective Jan 1, 2018, using the modified retrospective method.

The segment margin expanded 490 basis points (bps) to 12.6% on favorable overhead rate performance and cost growth, and manufacturing inefficiencies in the fourth quarter of 2017 on electric propulsion contracts.

Real Estate: The segment’s revenues of $3 million outpaced the year-ago quarter’s top-line figure of $1.6 million.

Financial Update

Aerojet Rocketdyne exited 2018 with cash and cash equivalents of $735.3 million, up from $535 million as of Dec 31, 2017.

Long-term debt amounted to $352.3 million, down from $591.4 million as of Dec 31, 2017.

Operating cash flow from continuing operations summed $252.7 million as of Dec 31, 2018, compared with cash flow of $212.8 million in the year-ago period.

Free cash flow at the end of 2018 was $209.5 million compared with the year-ago free cash flow of $183.4 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.


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