Stock Story -
Aerospace and defense company Redwire (NYSE:RDW) reported Q2 CY2024 results topping analysts' expectations, with revenue up 30% year on year to $78.11 million. On the other hand, the company's full-year revenue guidance of $300 million at the midpoint came in 1.4% below analysts' estimates. It made a GAAP loss of $0.42 per share, down from its loss of $0.16 per share in the same quarter last year.
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Redwire (RDW) Q2 CY2024 Highlights:
- Revenue: $78.11 million vs analyst estimates of $68.38 million (14.2% beat)
- EPS: -$0.42 vs analyst estimates of -$0.11 (-$0.32 miss)
- The company reconfirmed its revenue guidance for the full year of $300 million at the midpoint
- Gross Margin (GAAP): 16.6%, down from 26.5% in the same quarter last year
- EBITDA Margin: 2.1%, up from -2.1% in the same quarter last year
- Free Cash Flow was -$11.19 million, down from $1.20 million in the previous quarter
- Market Capitalization: $402.7 million
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 GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Over the last four years, Redwire grew its sales at an incredible 138% compounded annual growth rate. This is encouraging because it shows Redwire's offerings resonate with customers, a helpful starting point.
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Redwire's annualized revenue growth of 42.7% over the last two years is below its four-year trend, but we still think the results were good and suggest demand was strong.
This quarter, Redwire reported remarkable year-on-year revenue growth of 30%, and its $78.11 million of revenue topped Wall Street estimates by 14.2%. Looking ahead, Wall Street expects sales to grow 7.8% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling them, and, most importantly, keeping them relevant through research and development.
Unprofitable industrials companies require extra attention because they could get caught swimming naked if the tide goes out. It's hard to trust that Redwire can endure a full cycle as its high expenses have contributed to an average operating margin of negative 16.1% over the last five years.
On the bright side, Redwire's annual operating margin rose by 4.7 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.
This quarter, Redwire generated an operating profit margin of negative 9.1%, down 2.7 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.
EPSAnalyzing revenue trends tells us about a company's historical growth, but earnings per share (EPS) growth points to the profitability of that growth–for example, a company could inflate sales through excessive spending on advertising and promotions.
Although Redwire's full-year earnings are still negative, it reduced its losses and improved its EPS by 34.4% annually over the last two years.
In Q2, Redwire reported EPS at negative $0.42, down from negative $0.16 in the same quarter last year. This print missed analysts' estimates. Over the next 12 months, Wall Street is optimistic. Analysts are projecting Redwire's EPS of negative $0.98 in the last year to reach break even.
Key Takeaways from Redwire's Q2 ResultsWe were impressed by how significantly Redwire blew past analysts' revenue expectations this quarter. On the other hand, its EPS missed and its full-year revenue guidance slightly fell short of Wall Street's estimates. Overall, this was a weaker quarter for Redwire. The stock traded down 1.2% to $5.67 immediately following the results.
