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Aerojet Rocketdyne (AJRD) Up 8.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Aerojet Rocketdyne Holdings (AJRD - Free Report) . Shares have added about 8.6% in that time frame, outperforming the S&P 500.

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

Aerojet Rocketdyne Q2 Earnings Top, Revenues Up Y/Y

Aerojet Rocketdyne reported second-quarter 2018 earnings of 45 cents per share, surpassing the Zacks Consensus Estimate of 26 cents by 73.1%. The reported figure was 40.6% higher than the year-ago quarter’s bottom line of 32 cents.

This year-over-year upside in earnings was driven by an improved operational performance in the reported quarter.

Operational Performance

In the quarter under review, the company’s revenues of $467.2 million witnessed 1.7% year-over-year growth. The reported number also surpassed the Zacks Consensus Estimate of $465 million by 0.5%.

Aerojet Rocketdyne’s total backlog at the end of second-quarter was $3.9 billion, which came in line with the backlog at the end of first quarter. Of this, funded backlog totaled $1.5 billion compared with $1.6 billion at first-quarter end.

Total operating expenses inched up 0.2% to $399.2 million in the second quarter. Operating income of $68 million improved 10.6% from $61.5 million a year ago.

Segmental Performance

Aerospace & Defense: The segment’s revenues were up 1.7% year over year to $465.6 million, driven by increased deliveries on the back of PAC-3 and Standard Missile programs.

Also, the segment margin expanded 220 basis points (bps) to 14.5%, which was primarily driven by risk retirements derived from RS-25 program coupled with better-than-expected overhead rate performance.

Retail Estate: The segment’s revenues of $1.6 million came in line with the year-ago quarter’s top-line figure.

Financial Update

Aerojet Rocketdyne exited the second quarter with cash and cash equivalents of $514.7 million, down from $535 million as of Dec 31, 2017.

Long-term debt was $581 million, down from $591.4 million as of Dec 31, 2017.

Operating cash inflow from continuing operations was $119.9 million as of Jun 30, 2018 compared with cash inflow of $40.8 million in the year-ago period.

Free cash inflow at the end of the second quarter was $111.8 million compared with the year-ago quarter’s tally of $37.4 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 5.26% due to these changes.

VGM Scores

At this time, Aerojet Rocketdyne has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for momentum and to a lesser degree value.

Outlook

Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise Aerojet Rocketdyne has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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