Trading Earnings: An Earnings Predator

AeroVironment, Inc. (AVAV) is set to report earnings After the market closes this afternoon. AeroVironment, Inc. engages in the design, development, and production of unmanned aircraft systems and energy technologies for various industries and governmental agencies..

AVAV is expected to earn a profit of 27 cents for its 2nd quarter. We expect the defense/alternative energy company to announce earnings that will beat investors’ and analysts’ expectations. Aero has had no problem handling consensus estimates surpassing the expected numbers for 7 straight quarters.

Management says to expect the company to grow around 20-25% during the year. That means a forward P/E of 22.64 is in-line. With a PEG ratio of 1.36 and no debt to speak of, AVAV has the financial flexibility to continue rewarding shareholders. Despite the market sucking portfolios dry, Aero is up more than 30% in the last year.
AVAV has the potential combustible combination of positive earnings announcement and a growing short position. Forbes recently noted that Aero’s short position has grown by more than 45% since November 21st. A solid earnings announcement could ignite a short-squeeze fire.

According to our technical analysis, this stock is poised to move following earnings. As you will see on the chart, the stock currently stands on two inflection points. We have a triangle formation and the MACD lines resting on one another. In both cases something has to give. Aero has a history of strong performance following its quarterly performance. Let’s hope 8 is magic and management gives the right answers this afternoon.

Suggested Stop: $26.96

Filed Under: Day Trades