Things are looking up for aerospace company Aerovironment Inc.

For now.

The Monrovia company surprised investors last week with strong quarterly earnings, at a time when many companies are struggling under the effects of the downturn.

Aerovironment beat analysts' expectations with income of $5.8 million, or 27 cents per share, on revenue of $76 million in the fiscal fourth quarter ended April 30.

The company designs and manufactures small, unmanned aircraft used primarily for military reconnaissance, and also develops advanced battery systems. Founded in 1971, Aerovironment has consistently produced double-digit percentage growth since going public in early 2007 due largely to the recent popularity of its lightweight Raven aircraft, which has been used extensively by troops in Iraq and Afghanistan.

With the recent growth spurt, the company has put out want ads in an effort to hire as many as 100 employees.

The company's management last week predicted revenue would grow in the coming year by up to 22 percent. Chief Executive Tim Conver cited "growing opportunities" for its products due to "the U.S. government's recent commitments to increase the emphasis on soldier systems and intelligence, and surveillance and reconnaissance within the Department of Defense."

So-called unmanned aerial vehicles, or UAVs, have become increasingly popular with the government since the planes, often outfitted with cameras and global positioning systems, provide critical intelligence without putting soldiers in harm's way. The company has secured numerous contracts with the military and has a funded backlog of more than $114 million.

At the same time, the planes have hit the mainstream: Aerovironment's Wasp aircraft was recently featured in the Hollywood film "Eagle Eye."

The company derives nearly 15 percent of its revenue from advanced, quick-charge electric battery systems, which management expects to become more important in the coming months since the government has indicated that it will make electric vehicle development a greater national priority.

For the quarter, revenue from the electric battery segment was $10.6 million, up more than 25 percent from the previous year.

Energy advantage

Analysts, too, expect the battery division to take off.

"Over the next few quarters we expect electric vehicle efforts to begin attracting a significant amount of attention," said John Roy, an analyst with Janney Montgomery Scott LLC, in a research report. "With the Obama administration pushing hard on battery technology and development, Aerovironment is well-positioned to take advantage of the funding."

Still, Roy said he has become more concerned about the company's expected increase in operating expenses for fiscal 2010, and he reduced his expected earnings per share from $2.37 to $1.83.

The company's stock surged by more than 11 percent after the earnings announcement, but shares settled as investors examined the company's long-term outlook. Shares closed June 25 at $28.50, about where they were before the June 23 announcement.

A number of analysts in addition to Roy cut their earnings estimates. Michael Ciarmoli of Boenning & Scattergood Inc. and Troy Lahr of Stifel Nicolaus & Co. Inc. said research and development costs, plus related tax liabilities, could be greater than anticipated.

Howard Rubel of Jefferies & Co. said he expects 2010 earnings to "be particularly lumpy."

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