Drone maker Aerovironment Inc. (AVAV) fell the most in almost four years after its third-quarter sales plunged 35 percent amid a slowdown in U.S. military orders.
“We’ve experienced acquisition delays in the past that have impacted planned revenues within a period, but never of this magnitude,” Chief Executive Officer Tim Conver said yesterday during a conference call with analysts.
Aerovironment said yesterday that its sales declined to $47.1 million in the quarter ended Jan. 26 compared with $72 million in the year-ago period. Analysts had predicted revenue of $89.3 million, the average of 13 estimates compiled by Bloomberg.
The company cut its full-year profit forecast to 30 cents to 50 cents a share, from $1.41 to $1.51 a share.
Orders for Monrovia, California-based Aerovironment’s small surveillance drones slowed as the Pentagon prepared for automatic budget cuts that took effect March 1. The reductions, known as sequestration, will slice $85 billion from government programs in the next seven months.
Delays in the federal government’s acquisitions have “exceeded even our most conservative estimates and we have reset our order plans and our expectations,” Conver said.
Contracts to provide small drones to the military haven’t been canceled, and the Defense Department still intends to complete planned purchases, he said.
Jeremy Devaney, an analyst at BB&T Capital Markets in Reston, Virginia, downgraded Aerovironment shares to hold from buy.
“We are stepping to the sidelines because we are concerned that some near-term upside catalysts are no longer present and others are at risk of slipping” into fiscal 2014, he wrote in a note to clients today.
William Loomis, an analyst at Stifel Nicolaus & Co. in Baltimore, maintained his hold rating on Aerovironment shares.
“We do see the company as being well positioned to recover once the budget and procurement process stabilize given its strong market share,” he wrote today in a note to clients.
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