Why Astronics Stock Popped Today
Key Points
Astronics beat on both sales and earnings last night.
Management is promising positive free cash flow for the year -- and is probably right about that.
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Aerospace and defense company Astronics Corporation (NASDAQ: ATRO) stock surged 15.8% through 11:30 a.m. ET on Wednesday after beating analyst forecasts for Q2 earnings last night.
Heading into the report, Wall Street thought Astronics would earn $0.54 per share on $245.8 million in quarterly sales. Astronics actually earned $0.70 per share on sales of $260 million.
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Astronics Q2 earnings
Astronics sales grew 27% year over year, and the company earned a strong 15.6% operating profit margin on these sales in the quarter. Aerospace sales were particularly strong, making up more than 91% of all sales in the quarter -- and at superior operating margins of 20.3%.
Most of these operating profits fell all the way to the bottom line, where earnings calculated under generally accepted accounting principles (GAAP) were actually $0.75 per share -- higher than the non-GAAP $0.70 profit.
What's next for Astronics stock
Looking ahead to the second half of this year, Astronics guided investors to expect $265 million to $275 million in Q3 sales and more than $1 billion in total sales through year-end. Backlog looks strong at $780.6 million, and with strong order flow in the quarter, Astronics scored a book-to-bill ratio of nearly 1.2, implying that sales will accelerate going forward.
Management didn't provide specific earnings guidance for either Q3 or the year, but said it expects to end 2026 with positive free cash flow. With operating cash flow topping $30 million in Q2 alone, and an expectation for no more than $45 million in capital spending this year, I'd say that's a safe bet.
Still, at a valuation of $4.3 billion after today's spike in share price, the stock looks pricey to me at more than 72x FCF. I'd hold off on buying Astronics stock until the price cools down a bit.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Astronics. The Motley Fool has a disclosure policy.
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