Why Redwire Stock Soared After Earnings
Key Points
Redwire beat on sales and earnings last night.
The space-and-drones stock is growing sales rapidly, but remains years from profitability.
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Space stock-turned-drones stock Redwire Corporation (NYSE: RDW) closed up 11% on Thursday after beating analyst targets in its Q2 report last night.
Heading into the report, Wall Street expected Redwire to lose $0.16 per share on sales of $107.9 million, and while the company did lose money, it lost less than expected -- only $0.09 per share. Sales solidly beat expectations at $117 million.
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Redwire Q2 earnings: by the numbers
CEO Peter Cannito boasted that quarterly revenue set a new record for Redwire, as did the company's gross profit margin earned on that revenue -- 27.8%, up from negative margins a year ago -- as did the company's backlog for work to be done: $542.1 million.
In reaching this level, Redwire booked 42% more new contracts than it billed for work performed -- a book-to-bill ratio of 1.42. The company inked contracts in the quarter to supply drones to NATO allies, the U.S. Marine Corps, and the U.S. Army, and partnered with multiple pharmaceutical companies and educational institutions on "on-orbit operations for pharmaceutical drug development."
What's next for Redwire stock
Revenue continues to grow strongly, with Redwire anticipating $450 million to $500 million in sales through the end of this year -- as much as 49% annual growth over last year's $335 million.
That probably still won't be enough to turn the company profitable, however. Management didn't promise anything of the sort, and analysts who follow Redwire forecast a $0.58 per share loss this year... and another loss next year... and another loss the year after that.
The good news is that, with $558 million in the bank and a cash burn rate below $100 million, Redwire still has a few years to find its footing and become a viable business. The bad news is: It's not quite there yet.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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