Aerojet Rocketdyne Holdings, Inc. (AJRD) in Rancho Cordova, Calif., is a world-recognized aerospace and defense equipment manufacturer. The company’s clientele includes the U.S. Department of Defense, NASA, and prime aerospace and defense contractors.
AJRD was poised to merge with leading defense equipment manufacturer Lockheed Martin Corporation (LMT). However, the merger was terminated on February 13, following a U.S. Federal Trade Commission lawsuit that sought a preliminary injunction to block the acquisition.
Nonetheless, AJRD has been focused on expanding its operations to boost its growth. Analysts expect the company’s revenues to grow at a stable rate through its fiscal year 2022. In addition, AJRD has delivered strong shareholder returns of more than 166% over the past five years, outperforming the benchmark S&P index and Aerospace and Defense index by 62% and 33%, respectively. Shares of AJRD have gained marginally over the past five days, on increased investor attention on defense stocks amid the escalating Russia-Ukraine crisis.
Here’s what could shape AJRD’s performance in the near term:
Expanding Operations
AJRD has secured several contracts from NASA over the past few months. Last November, NASA announced that its first planetary defense mission–the Double Asteroid Redirection Test–will be equipped with a full suite of ARJD propulsion. This reflects the promising growth prospects of AJRD’s new electric propulsion technology, which could support future deep space, national security space, and commercial missions. Last September, the company was also awarded a NASA contract to develop the Orion Spacecraft Main Engine.
Earlier this month, AJRD successfully tested its Store Chemical Energy Propulsion lithium boiler, which could be used to develop high-quality products for the U.S. Navy.
Stable Growth Prospects
AJRD is focused on advancing its hypersonics and strategic tactical and missile defense systems to maintain its leadership in the space exploration and defense growth markets. The company’s current backlog is more than three times its annual sales, reflecting robust demand and market dominance. The current macroeconomic environment and rising focus on space exploration are expected to fuel AJRD’s growth over the long term.
Regarding this, AJRD CEO and President Eileen P. Drake said, “We are confident in our strategic plan and future performance and are poised to deliver substantial value to our shareholders driven by our continued leadership in key space exploration and defense growth markets, including advancing hypersonics and strategic, tactical and missile defense systems.”
Impressive Financials
AJRD’s net sales increased 6% year-over-year to a record $589.70 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its operating income came in at $65.50 million, up 12.9% from the same period last year. Its EBT rose 22.4% from its year-ago value to $53 million. Its net income improved 7.3% from the prior-year quarter to $38 million, while its EPS increased 7% year-over-year to $0.46, and its adjusted EBITDA rose marginally from the same period last year to $70.90 million.
POWR Ratings Reflect Rosy Prospects
AJRD has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AJRD has a B grade for Value and Quality. The stock’s 1.28 forward Price/Sales multiple is 9.2% lower than the 1.41 industry average, which justifies the Value grade. In addition, AJRD’s 37.24% trailing-12-month ROE is 174.2% higher than the 13.58% industry average, in sync with the Quality grade.
Among the 74 stocks in the Air/Defense Services industry, AJRD is ranked #12.
Beyond what I’ve stated above, view AJRD ratings for Growth, Sentiment, Stability, and Momentum here.
Bottom Line
As the Russian invasion of Ukraine intensifies, the demand for defense equipment is expected to increase substantially as the U.S. sends armed forces and equipment to Ukraine. Furthermore, the heightened interest in space exploration is expected to boost ARJD’s growth prospects over the long term. Thus, we think ARJD is an ideal investment bet now.
How Does Aerojet Rocketdyne Holdings, Inc. (AJRD) Stack Up Against its Peers?
While AJRD has a B rating in our proprietary rating system, one might want to consider looking at its industry peer Elbit Systems Ltd. (ESLT), which has an A (Strong Buy) rating.
AJRD shares were unchanged in premarket trading Friday. Year-to-date, AJRD has declined -20.87%, versus a -9.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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