Analyst Downgrades AeroVironment

HARTFORD, Conn. (AP) — Shares of AeroVironment Inc. fell Tuesday as an analyst downgraded the unmanned aircraft maker, saying it has recovered from a steep sell-off in March, but it faces headwinds which will crimp its sales and earnings growth beyond fiscal 2010.

Stifel, Nicolaus analyst Troy J. Lahr cut AeroVironment's rating to "Hold" from "Buy," noting the stock's recent uptick, and saying the Monrovia, Calif.-based company could see sales and earnings rise about 20 percent in fiscal 2010.

However, he warned that level of growth is "likely unsustainable" over the long term due to competition, lower troop levels in Iraq, bugetary pressures and other factors.

AeroVironment's shares have advanced sharply recently, closing at $28.54 Monday, up nearly 50 percent from a low of $19.27 on March 18.

In the near term, Lahr expects AeroVironment's fiscal fourth quarter profit to at least meet consensus estimates and predicts a cautiously optimistic tone from the company for its fiscal 2010 outlook.

Analysts surveyed by Thomson Reuters expect fourth-quarter earnings of 25 cents per share.

The fiscal 2010 Pentagon budget boosted AeroVironment's unmanned drone, with spending up 83 percent, to $138 million, Lahr said. However, the additional U.S. defense spending benefiting AeroVironment already is priced into the shares, he said.

Shares fell 97 cents, or 3.4 percent, to $27.57 in midday trading.