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Bull Of The Day: AeroVironment (AVAV)

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AeroVironment (AVAV - Free Report) is a Zacks Rank #1 (Strong Buy) and it is the Bull of the Day today.  Let's take a look at the recent moves in estimates and why it has ascended to the best Zacks Rank.

Description

AeroVironment, Inc. designs, develops, produces, operates a portfolio of products and services 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. The Company supplies UAS, tactical missile systems and related services primarily to organizations within the United States Department of Defense. The Company also supplies charging systems and services for electric vehicles, and power cycling and test systems to commercial, consumer and government customers. It serves the U.S. Department of Defense, including the U.S. Army, Marine Corps, Special Operations Command, Air Force, and Navy.

Earnings History

AVAV has topped the Zacks Consensus Estimate in each of the last three quarters.  The most recent report came on November 29 and it was a solid beat, coming in $0.13 ahead of the Zacks Consensus Estimate.  That beat translated into a positive earnings surprise of 81%, and that followed positive earnings surprises of 800%+ and 63% in the last two quarters.

Estimate Revisions

Following the most recent beat, estimates have moved higher.  The Zacks Consensus Estimate for 2018 has moved from $1.36 to $1.54 in the span of about 4 weeks.  

Over that same time horizon, the Zacks Consensus Estimate for 2019 moved from $1.49 to $1.56.

When earnings estimates move higher, the Zacks Rank tends to follow suit.

Valuation

At 46x forward earnings, AVAV is somewhat richly valued.  At the same time a 3.8x price to book isn't that bad and there could still be room for growth in terms of the price to sale multiple of 5x.  

Margins have been improving of late and if that continues, earnings estimates are bound to move higher.

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