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Why Is Aerojet Rocketdyne (AJRD) Up 1.7% Since Last Earnings Report?

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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 1.7% 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's Q1 Earnings Beat, Improve Y/Y

Aerojet Rocketdyne reported first-quarter 2019 adjusted earnings of 44 cents per share, which surpassed the Zacks Consensus Estimate of 31 cents by 41.9%. The bottom line also improved 100% year over year from 22 cents registered in the year-ago quarter.

Barring one-time adjustments, the company reported GAAP earnings of 47 cents per share, reflecting a solid improvement of 161.1% from 18 cents recorded in the prior-year quarter. This upside can be attributed to lower cost of sales and increased operating income in the quarter under review.

Operational Performance

The company’s first-quarter revenues of $491.7 million were almost in line with the year-ago quarter’s figure. However, the top line exceeded the Zacks Consensus Estimate of $487 million by 0.9%.

Aerojet Rocketdyne’s total backlog at the end of first quarter 2019 totaled $3.8 billion, lower than $4.1 billion registered at the end of 2018. Of this, funded backlog amounted to $1.8 billion compared with $1.9 billion at 2018 end.

Total operating expenses declined 45% to $11.5 million in the first quarter. Meanwhile, operating income of $63.3 million improved a solid 59.8% from $39.6 million a year ago.

Segmental Performance

Aerospace & Defense: Revenues at this segment remained flat year over year at $490 million owing to an increase in defense programs’ net sales primarily driven by the Patriot Advanced Capability-3 (PAC-3) program. However, a decrease in space programs net sales affected the segment’s top line.

The segment’s margin expanded 720 basis points (bps) to 14.2%.

Real Estate: The segment generated revenues of $1.7 million compared with the year-ago quarter’s figure of $1.6 million.

Financial Update

Aerojet Rocketdyne exited the first quarter with cash and cash equivalents of $706.6 million, down from $735.3 million as of Dec 31, 2018.

Long-term debt amounted to $367.9 million, up from $352.3 million as of Dec 31, 2018.

Operating cash outflow from continuing operations summed $17.7 million as of Mar 31, 2019, compared with cash outflow of $95.4 million in the year-ago period.

Free cash flow at the end of reported quarter was $19.2 million compared with free cash flow of $99.5 million a year ago.

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 25.4% due to these changes.

VGM Scores

At this time, Aerojet Rocketdyne has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

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

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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