Bear Of The Day: AeroVironment (AVAV)
AeroVironment (AVAV) is a Zacks Rank #5 (Strong Sell) despite beating the Zacks Consensus Estimate in each of the last four quarters. You don’t often see a stock that has beaten the number as consistently as AVAV fall to a Zacks Rank #5 (Strong Sell) so let’s take a look at why that is the case in this Bear of the Day article.
AeroVironment, Inc makes and services drones for government agencies, businesses and consumers. It operates through two segments: Unmanned Aircraft Systems, which focuses primarily on the design, development, production, support and operation of UAS and tactical missile systems that provide situational awareness, multi-band communications, force protection and other mission effects, and Efficient Energy Systems, which focuses primarily on the design, development, production, support and operation of electric energy systems..
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of AVAV, I see four straight beats of the Zacks Consensus Estimate over the last year. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For AVAV I see estimates moving lower.
This quarter fallen from $0.79 to $0.36.
Next quarter dropped from $1.30 to $0.37.
The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.
The current fiscal year 2022 consensus number has been just about cut in half from $2.60 to $1.33.
The next fiscal year 2023 number has dropped from $3.09 to $1.67 over the last 60 days.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
AeroVironment, Inc. Price, Consensus and EPS Surprise
AeroVironment, Inc. price-consensus-eps-surprise-chart | AeroVironment, Inc. Quote
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