Aerojet Rocketdyne (AJRD) Down 25% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Aerojet Rocketdyne Holdings (AJRD). Shares have lost about 25% in that time frame, outperforming 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 Q4 Earnings Down Y/Y, Sales Up

Aerojet Rocketdyne Holdings, Inc. reported fourth-quarter 2019 adjusted earnings of 27 cents per share, which declined 18.2% from 33 cents in the year-ago quarter.

The Zacks Consensus Estimate for earnings was pegged at 46 cents per share.

Including one-time adjustments, the company reported GAAP earnings of 30 cents per share, reflecting a rise of 3.4% from 29 cents in the prior-year quarter. This upside can be attributed to improved year-over-year sales in the quarter under review.

For 2019, the company reported earnings of $1.56 per share, which came in 19.2% lower than the prior-year figure of $1.93.

Operational Performance

Aerojet Rocketdyne’s fourth-quarter sales of $523 million increased 19.4% from the year-ago quarter figure of $437.9 million. The top line also surpassed the Zacks Consensus Estimate of $504 million by 3.8%.

For 2019, the company recorded sales of $1.98 billion, which beat the Zacks Consensus Estimate of $1.96 billion by 1%. The full-year top line improved 4.5% from $1.90 billion recorded in the year-ago period.

Total backlog at the end of 2019 was $5.4 billion compared with $4.1 billion as of Dec 31, 2018. Of this, funded backlog amounted to $2.1 billion compared with $1.9 billion at 2018-end. The upside in backlog was driven by large multi-year awards on the Standard Missile and THAAD programs.

Total operating expenses grew 23.8% year over year to $474.3 million in the fourth quarter. Operating income of $48.7 million declined 11% from $54.7 million a year ago.

Segmental Performance

Aerospace & Defense: Revenues at this segment improved 19.8% year over year to $520.9 million. This can be primarily attributed to an increase in defense programs including the Patriot Advanced Capability-3, Guided Multiple Launch Rocket System and hypersonic booster programs. Also, an increase in space programs driven by growth in the RS-25 program contributed to this segment’s sales growth.

Real Estate: The segment generated revenues of $2.1 million compared with the year-ago quarter’s $3 million.

Financial Update

Aerojet Rocketdyne exited 2019 with cash and cash equivalents of $932.6 million, up from $735.3 million as of Dec 31, 2018.

Long-term debt amounted to $352.3 million as of Dec 31, 2019, same as of Dec 31, 2018.

Net cash provided by operating activities amounted to $261.2 million as of Dec 31, 2019, compared with $252.7 million in the year-ago period.

Free cash flow at the end of 2019 was $218.3 million compared with $209.5 million at the end of 2018.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -7.64% due to these changes.

VGM Scores

Currently, Aerojet Rocketdyne has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Aerojet Rocketdyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.