What happened
Aerospace interiors specialist Astronics(NASDAQ: ATRO) fell short of earnings expectations in the most recent quarter, and continues to deal with some supply chain issues. Investors were not impressed, sending Astronics shares down more than 15% on Friday.
So what
Astronics is an aerospace supplier that specializes in cabin electronics, including in-seat power outlets and the lighting panels above the seat. On Friday, the company reported a second-quarter loss of $0.37 per share on revenue of $174.5 million, a mixed report relative to Wall Street expectations for a $0.23 per share loss on revenue of $172 million.
Revenue was up 35% year over year, and Astronics closed the quarter with a backlog of $611.1 million in future business, but the company was held back by some supply chain issues and legal expenses.
Astronics has a long-running legal dispute with a German competitor involving its in-seat power and electrical outlet products that has been playing out in four separate jurisdictions. Astronics won its case in the U.S. but lost in the U.K., with a case in France nearing a potential resolution and one in Germany that is likely to linger into 2024 at least.
The company said that despite the loss, the core business is strong and growing.
"Demand for our products is high and our supply chain continues to improve," CEO Peter J. Gundermann said. "We believe we are set for a strong second half of 2023 and, if current trends continue, an even stronger 2024."
Now what
The quarter wasn't fantastic, but the stock price reaction seems overdone. The company's aerospace arm, which is responsible for the bulk of revenue, is nearing a return to pre-pandemic levels and has new wins including the Airbus A200 that should carry it forward. It is also working with makers of electric vertical take-off and landing (eVTOL) aircraft that have a heavy need for Astronics expertise.
The trouble is mostly in Astronics' smaller testing division. Astronics is looking to cut costs there, and hopes to eventually see a rebound thanks to new program wins including a U.S. Marine Corps Handheld Radio Test Set.
These initiatives will take time to play out. On Friday, at least, the market is showing very little patience with Astronics.
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Lou Whiteman 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.
