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Why Is Aerojet Rocketdyne (AJRD) Down 2.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Aerojet Rocketdyne Holdings (AJRD - Free Report) . Shares have lost about 2.9% 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 drivers.

Aerojet Rocketdyne Q3 Earnings Miss, Revenues Down Y/Y

Aerojet Rocketdyne Holdings, Inc reported third-quarter 2019 adjusted earnings of 35 cents per share, which missed the Zacks Consensus Estimate of 46 cents by 23.9%. The bottom line also slumped 60.3% from 88 cents in the year-ago quarter.

Barring one-time adjustments, the company reported GAAP earnings of 39 cents per share, reflecting a decline of 52.4% from 82 cents in the prior-year quarter. This decrease can be attributed to declining sales and lower operating income in the quarter under review.

Operational Performance

Aerojet Rocketdyne’s third-quarter revenues of $481.8 million declined 3.4% from the year-ago quarter’s $498.8 million. The top line also missed the Zacks Consensus Estimate of $505 million by 4.6%.

Total backlog at the end of third-quarter 2019 was $4.5 billion compared with $4.1 billion as of December 31, 2018. Of this, funded backlog amounted to $2.1 billion compared with $1.8 billion at 2018 end.

Total operating expenses grew 9.3% year over year to $426.7 million in the third quarter. Meanwhile, operating income of $55.1 million plunged 49.1% from $108.3 million a year ago.

Segmental Performance

Aerospace & Defense: Revenues at this segment declined 3.5% year over year at $480 million. This can be primarily attributed to a decrease of $27.9 million in space programs, particularly the RS-68 program.

Meanwhile, the segment’s margin contracted 820 basis points (bps) to 13.5%.

Real Estate: The segment generated revenues of $1.8 million compared with the year-ago quarter’s $1.6 million.

Financial Update

Aerojet Rocketdyne exited the third quarter with cash and cash equivalents of $797 million, up from $735.3 million as of Dec 31, 2018.

Long-term debt amounted to $359.2 million as of Sep 30, 2019, up from $352.3 million as of Dec 31, 2018.

Net cash provided by operating activities amounted to $96.4 million as of Sep 30, 2019, compared with $97 million in the year-ago period.

Free cash flow at the end of the first nine months of 2019 was $80.1 million compared with $76.1 million in the same period last year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted -6.29% due to these changes.

VGM Scores

At this time, Aerojet Rocketdyne has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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. Notably, Aerojet Rocketdyne has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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