Should You Buy, Hold or Sell ATRO Stock Ahead of Q2 Earnings Release?

Astronics Corporation ATRO is slated to release second-quarter 2025 results on Aug. 6, after market close.  

The Zacks Consensus Estimate for revenues is pegged at $207.1 million, implying 4.5% growth from the year-ago quarter's reported figure. The consensus mark for earnings is pegged at 33 cents per share, suggesting a massive improvement of 725% from the prior-year quarter’s reported figure of 4 cents. The bottom-line estimate has made no movement in the past 60 days. 

ATRO has an impressive earnings surprise history. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 55.64%.

Earnings Whisper for ATRO Stock

Our proven model does not conclusively predict an earnings beat for ATRO this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

ATRO has a Zacks Rank #3 and an Earnings ESP of 0.00% at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors to Consider for ATRO’s Q2 Results

Aerospace Unit to Drive Sales Growth

Higher commercial transport sales, backed by increased demand for cabin power and in-flight entertainment as well as connectivity products from the airlines, as a result of rapidly growing global commercial air traffic are likely to have bolstered ATRO’s Aerospace business segment’s sales.  Higher sales from military aircraft markets, driven by progress on the FLRAA program and increased demand for lighting and safety products, might also have bolstered this unit’s sales in the to-be-reported quarter. 

The Zacks Consensus Estimate for the Aerospace unit’s second-quarter sales is pegged at $190.2 million, indicating an improvement of 7.5% from the year-ago quarter’s reported figure. 

Test Systems Likely to Post Dismal Sales

Based on revised cost estimates and the delayed completion of the long-term mass transit contract, Astronics’ Test Systems unit is likely to have experienced a continued year-over-year sales decline in the second quarter. 

The Zacks Consensus Estimate for sales is pegged at $16.9 million, indicating a decline of 20% from the year-ago quarter’s reported figure. 

Other Factors to Consider

Strong sales performance from ATRO’s Aerospace businesses, which constitute approximately 90% of its total revenues, must have boosted the company’s overall top-line performance in the quarter.

Factors like solid sales expectations, strong gross profit margin expansion earned from continued sales volume growth and favorable operating leverage in the Aerospace unit, and cost savings anticipated in relation to the restructuring within the Test Systems segment are expected to have bolstered ATRO’s second-quarter earnings.

Price Performance & Valuation

Astronics’ shares have surged a solid 84.3% in the past six months, outperforming the Zacks Aerospace-Defense Equipment industry’s gain of 20.5% as well as the broader Zacks Aerospace sector’s rise of 19%. It also came in above the S&P 500’s gain of 2.4% in the same time frame. 

Other notable stocks from the same industry have also performed well in the past six months, but lagged ATRO’s performance. Shares of TransDigm Group TDG and Leonardo DRS DRS have surged 22.7% and 15.7%, respectively. 

From a valuation perspective, ATRO’s forward 12-month price-to-earnings (P/E) is 20.21X, a discount to its peer group’s average of 49.78X. This suggests that investors will be paying a lower price than the company's expected earnings growth compared to that of its peer group.

ATRO’s Price-to-Earnings (Forward 12 Months)

However, its industry peers are currently trading at a premium compared to ATRO. While the forward 12-month price/earnings multiple for Leonardo DRS is 34.68, the same for TransDigm Group is 37.51.

Investment Thesis

While growth opportunities in the global aerospace and defense space remain immense, some challenges persist, which investors should consider before investing in Astronics. Notably, the primary challenges that ATRO continues to face include varying levels of supply-chain pressures from the residual impacts of the COVID-19 pandemic, raw material unavailability and cost increases, and a rise in the cost of labor and labor availability, particularly skilled labor. 

Nevertheless, expanding commercial air traffic worldwide remains a major growth catalyst for ATRO. We may expect the company’s second-quarter results to duly reflect these growth trends in terms of notable revenue and earnings growth.

The company also enjoys a solid presence in the defense industry, which provides its portfolio with a diversified cushion against any crisis. 

However, the stock remains highly debt-ridden when compared to its Peer Group, as evident from the figure below, which reflects ATRO’s long-term debt-to-capital being substantially higher than that of its Peer Group.

ATRO’s Debt-to-Capital

Should You Buy ATRO Stock Before Q2 Earnings?

ATRO is less likely to disappoint with its second-quarter results, considering the year-over-year growth reflected in its sales and earnings estimates, a favorable Zacks Rank, and the strong six-month share price rally. However, taking into account its elevated leverage compared to its peers and break-even Earnings ESP, investors interested in ATRO may consider staying on the sidelines before Wednesday.  

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research