The unmanned aerial vehicle (UAV), often referred to as a pilotless drone, is the darling of Pentagon planners, largely because it's able to find and kill enemy combatants without putting American soldiers at risk. Fact is, a drone is always willing to die for its country. At the same time, drones are increasingly pervasive in the civilian sector for business and consumer applications.
All of these trends make AeroVironment (AVAV - Get Report) , the leading manufacturer of unmanned drones, a good bet now on the fast growth of these futuristic machines. The stock is among a group of small-cap technology companiesthat are poised to rocket higher in 2016.
AVAV data by YCharts
AeroVironment stock has soared 6.72% over the last five days, in the wake of stellar operating results. With a market cap of only $662.66 million and dominance of its industry, the company has plenty of room to grow.
Contrast the company's size and focus with its leading competitors, Raytheon (market cap: $38.26 billion) and Boeing(market cap: $98.38 billion), which are more diversified aerospace and defense giants.
Although often portrayed by his opponents as soft on defense, President Obama has shown a hearty willingness to deploy "hunter-killer" drones in combat theaters overseas and his administration continually proposes big hikes in drone spending.
Meanwhile, a "drone caucus" has emerged in the halls of Congress that fiercely protects drone funding and touts them as a way to help save money on defense, protect the lives of U.S. soldiers, better patrol America's borders, and assist law enforcement agencies in surveillance.
AeroVironment reported second quarter fiscal 2016 financial results on Dec. 8, exceeding analysts' expectations for both revenue and earnings. Revenue came in at $64.7 million, a year-over-year increase of 23%. Earnings reached $4.4 million for earnings per share of 19 cents, after a loss in the year-ago quarter. The company's unmanned aircraft systems segment drove the results, with revenue up 31% year-over-year in the quarter. Significantly for future growth, AeroVironment reported that its backlog increased nearly 50% in the quarter to $97.2 million.
Contrast the company's size and focus with its leading competitors, Raytheon (market cap: $38.26 billion) and Boeing(market cap: $98.38 billion), which are more diversified aerospace and defense giants.
Although often portrayed by his opponents as soft on defense, President Obama has shown a hearty willingness to deploy "hunter-killer" drones in combat theaters overseas and his administration continually proposes big hikes in drone spending.
Meanwhile, a "drone caucus" has emerged in the halls of Congress that fiercely protects drone funding and touts them as a way to help save money on defense, protect the lives of U.S. soldiers, better patrol America's borders, and assist law enforcement agencies in surveillance.
AeroVironment reported second quarter fiscal 2016 financial results on Dec. 8, exceeding analysts' expectations for both revenue and earnings. Revenue came in at $64.7 million, a year-over-year increase of 23%. Earnings reached $4.4 million for earnings per share of 19 cents, after a loss in the year-ago quarter. The company's unmanned aircraft systems segment drove the results, with revenue up 31% year-over-year in the quarter. Significantly for future growth, AeroVironment reported that its backlog increased nearly 50% in the quarter to $97.2 million.
This California-based company boasts a pipeline stuffed with innovative products that the military brass covets. UAVs have become a ubiquitous feature on the 21st century battlefield, particularly in Iraq and Afghanistan. The Predator drone, made by the private company General Atomics, has become synonymous with UAVs in the popular imagination. However, AeroVironment offers the broadest array of UAV products than any of its competitors, especially ultra-sophisticated drones predicated on nanotechnology.
AeroVironment dominates the world's unit production of UAVs, giving it the biggest market share by far of any UAV manufacturer and making it one of the most promising small-cap technology stars of 2016 and beyond.
AeroVironment also makes commercial drones, a booming industry. Last year, the company made history when its Puma UAV became the first domestic model to win FAA approval for commercial use. The agency gave AeroVironment "permission to use a Puma drone to survey pipelines, roads and equipment at Prudhoe Bay in Alaska."
UAVs are the most dynamic growth sector of the aerospace industry. According to a new study from Teal Group, an aerospace consultancy based in Fairfax, Virg., UAV production will soar from current worldwide UAV production of $4 billion annually to $14 billion, totaling $93 billion in the next 10 years.
AVAV now trades at about $28, with the analyst consensus calling for a one-year target of $36, for a gain of nearly 30%.
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