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AeroVironment Slips; Analyst Starts At 'Neutral'

The Associated Press

HARTFORD, Conn. (AP) — Shares of AeroVironment Inc. slipped Tuesday afternoon after an analyst began coverage of the unmanned aircraft maker with a "Neutral" rating and profit estimates below Wall Street expectations.

Broadpoint AmTech analyst Peter Arment introduced earnings-per-share estimates of $1.07 for the current fiscal year ending in April, $1.15 for fiscal 2010 and $1.35 for fiscal 2011.

On average, analysts surveyed by Thomson Reuters expect earnings per share of $1.11 in fiscal 2009, $1.24 in fiscal 2010 and $1.40 in fiscal 2011.

Monrovia, Calif.-based AeroVironment supplies surveillance and reconnaissance craft relied on by the U.S. military in Afghanistan, Arment said in a note to investors.

Furthermore, AeroVironment's strong track record in designing advanced airframes has allowed it to dominate the small unmanned aircraft system market, he said. The demand for such systems will increase dramatically as President Barack Obama directs the military to focus operations more on Afghanistan as troop levels are reduced in Iraq, Arment said.

He said he is "very interested" in the technologies and industries in which AeroVironment works, but said its shares are overvalued. The shares have pulled back from the mid $30-range since February, but is still at the upper end of share values for defense technology companies, he said.

"We do like the story long-term and would likely get more constructive as valuations come down," Arment said.

"We need more clarity on sales outlook and a further pull back in AeroVironment shares before getting constructive," he added.

Arment has a $16 price target on shares of AeroVironment. The stock sank 50 cents, or 2.5 percent, to $19.89 in afternoon trading.