The best offense is a good defense
With Kentucky Sen. Rand Paul mounting a 13-hour filibuster opposing President Obama’s tacit acknowledgment he could use drones to kill Americans on U.S. soil, it’s not a good time to be a drone maker as AeroVironment, Inc. (NASDAQ:AVAV) has found out. But worse than the rhetoric is the delays in government spending on the unmanned vehicles that the defense contractor said would cause $100 million in planned revenues to evaporate from its financial statements .
Now with sequestration in full swing and the country not coming apart at the seams, the tens of billions of dollars in across the board in spending cuts coming from the Defense Dept. budget could make the rest of the year even more difficult for AeroVironment.
While spending cuts in Washington, D.C., are different than those you’d have to effect to balance your checkbook — politicians call a lower than expected increase in spending a “cut,” unlike actually lowering the amount spent — AeroVironment, Inc. (NASDAQ:AVAV) will actually see reduced revenues flowing its way and has cut back its sales guidance for the year. Now it anticipates generating $230 million to $250 million in revenue, down from its previous forecast of $348 million to $370 million. Profits are also expected to be affected, and the drone maker slashed $0.30 to $0.50 per share from its estimates.
While Sen. Paul was roundly praised for droning on for an extended period of time, the lack of consensus in Washington regarding the best way to approach our country’s fiscal situation means AeroVironment, Inc. (NASDAQ:AVAV) may find its stock grounded for some time to come.
The article Why Did My Stock Just Die? originally appeared on Fool.com and is written by Rich Duprey.
Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends AeroVironment and Sohu.com. The Motley Fool owns shares of AeroVironment.
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