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Aerospace and defense technology solutions provider Astronics Corporation (NASDAQ:ATRO) beat analysts' expectations in Q2 CY2024, with revenue up 13.6% year on year to $198.1 million. On top of that, next quarter's revenue guidance ($200 million at the midpoint) was surprisingly good and 3.3% above what analysts were expecting. It made a GAAP profit of $0.04 per share, improving from its loss of $0.37 per share in the same quarter last year.
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Astronics (ATRO) Q2 CY2024 Highlights:
- Revenue: $198.1 million vs analyst estimates of $191 million (3.7% beat)
- EPS: $0.04 vs analyst estimates of $0.21 (-$0.17 miss)
- Revenue Guidance for Q3 CY2024 is $200 million at the midpoint, above analyst estimates of $193.6 million
- The company lifted its revenue guidance for the full year from $777.5 million to $790 million at the midpoint, a 1.6% increase
- Gross Margin (GAAP): 20.9%, up from 18.7% in the same quarter last year
- Free Cash Flow was -$8.06 million, down from $439,000 in the previous quarter
- Market Capitalization: $794.6 million
Integrating power outlets into many Boeing (NYSE:BA) aircraft, Astronics (NASDAQGS:ATRO) is a provider of technologies and services to the global aerospace, defense, and electronics industries.
AerospaceAerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Astronics struggled to generate demand over the last five years as its sales were flat. This is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Astronics's annualized revenue growth of 25.2% over the last two years is above its five-year trend, suggesting its demand recently accelerated.
This quarter, Astronics reported robust year-on-year revenue growth of 13.6%, and its $198.1 million of revenue exceeded Wall Street's estimates by 3.7%. The company is guiding for revenue to rise 22.8% year on year to $200 million next quarter, in line with the 24% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 6.1% over the next 12 months, a deceleration from this quarter.
Operating MarginAlthough Astronics was profitable this quarter from an operational perspective, it's generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 2.7% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It's hard to trust that Astronics can endure a full cycle.
Looking at the trend in its profitability, Astronics's annual operating margin decreased by 2.9 percentage points over the last five years. The company's performance was poor no matter how you look at it. It shows operating expenses were rising and it couldn't pass those costs onto its customers.
In Q2, Astronics generated an operating profit margin of 3.8%, up 3.1 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Sadly for Astronics, its EPS declined by 44.7% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
Diving into the nuances of Astronics's earnings can give us a better understanding of its performance. As we mentioned earlier, Astronics's operating margin improved this quarter but declined by 2.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Astronics, its two-year annual EPS growth of 23.2% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, Astronics reported EPS at $0.04, up from negative $0.37 in the same quarter last year. Despite growing year on year, this print missed analysts' estimates. Over the next 12 months, Wall Street is optimistic. Analysts are projecting Astronics's EPS of negative $0.37 in the last year to flip to positive $1.07.
Key Takeaways from Astronics's Q2 Results We were impressed by how significantly Astronics blew past analysts' revenue expectations this quarter. We were also glad it raised its full-year revenue guidance, which beat Wall Street's estimates. On the other hand, its EPS missed. Overall, we think this was a strong quarter that should satisfy shareholders. The stock remained flat at $21.82 immediately after reporting.
