ATRO Outperforms Industry Over the Past 3 Months: How to Play the Stock?

Shares of Astronics Corporation ATRO have surged 17.1% in the past three months, outperforming both the Zacks Aerospace-Defense Equipment industry’s growth of 3.1% and the broader Zacks Aerospace sector’s gain of 5.3%. It also came above the S&P 500’s return of 9.8% in the same time frame.

Other industry players like Rocket Lab USA, Inc. RKLB and Curtiss-Wright Corp. CW have also delivered a similar stellar performance in the past three months. Shares of RKLB and CW have risen 64.6% and 6.5%, respectively, in the said period.

With ATRO’s robust performance on the bourses, some investors might be tempted to buy immediately. However, before making such a strategic investment, it's crucial to thoroughly assess whether the company has the fundamental strengths to sustain long-term growth, or is the recent price surge just a fluke? Evaluating the durability of ATRO’s growth prospects and associated risks is essential to making an informed investment decision.

What Pushed Up ATRO Stock?

ATRO’s latest robust performance on the bourses seems to have been influenced by the following developments.

Recently, Astronics reported its second-quarter adjusted earnings of 38 cents per share, reflecting 90% year-over-year growth backed by strong profit. The company’s net sales of $204.7 million indicate year-over-year growth of 3.3%.

Moreover, the company hiked the lower end of its revenue guidance for 2025. This upward revision in guidance underscores management’s strong confidence in Astronics’ ability to deliver solid performance throughout the remaining quarters of 2025, which, in turn, must have boosted investors’ optimism for the stock.

Additionally, in July 2025, Astronics introduced the ATS-9000M Communications System Analyzer, an upgraded solution for Land Mobile Radio testing that enhances the features of its earlier model.

In the same month, the company also acquired Envoy Aerospace, an FAA Organizational Designation Authorization services provider, for $8 million. Such product launches, along with strategic acquisitions, should help Astronics further expand its service offerings, strengthen its market position and drive sustainable growth, thereby further boosting investor optimism.

Growth Prospects for ATRO Stock

Astronics has been gaining momentum as global defense and commercial aerospace activity continues to expand. In the second quarter of 2025, its Aerospace unit’s sales reached a record $193.6 million, nearly 9% higher than last year, driven by growth in both commercial transport market sales and military aircraft sales, with the drivers being increased demand for cabin power products from airlines as well as heightened demand for light and safety products from military businesses.

Looking ahead, we can expect the company to continue gaining substantially in these businesses, buoyed by industry tailwinds. As nations across the globe expand their defense budgets each year, Astronics should benefit from continued investment in advanced combat aircraft technologies.

On the other hand, the International Air Transport Association expects air travel demand to increase 5.8% year over year in 2025. No doubt, in line with this expected air passenger growth, airlines will continue to invest in improving cabin power access and enhancing in-flight connectivity, which, in turn, should serve as a key growth catalyst for ATRO.

In line with this, ATRO’s near-term earnings and sales estimates, as mentioned below, reflect solid growth prospects.

ATRO’s Estimates

The Zacks Consensus Estimate for 2025 sales implies year-over-year growth of 7%, while that for 2026 sales indicates an improvement of 9.1%.

The 2025 and 2026 bottom-line estimates also show a similar improving trend.

Further, the upward revision in its near-term earnings estimate over the past 60 days suggests investors’ increasing confidence in this stock’s earnings generation capabilities.

ATRO Stock Reflects Discounted Valuation

In terms of valuation, ATRO’s forward 12-month price-to-sales (P/S) is 1.43X, a discount to the industry average of 10.17X. This suggests that investors will be paying a lower price than the company's expected sales growth compared with its industry average.

Other industry peers, on the contrary, are trading at a premium to ATRO. While RKLB is trading at a forward 12-month P/S of 30.61X, CW is trading at 5.10X.

Risks to Consider Before Choosing ATRO

Aerospace-defense companies, such as ATRO, CW and RKLB, continue to face supply-chain challenges, including shortages of raw materials, rising input costs and limited availability of skilled labor. These issues add pressure to production schedules and overall efficiency.

The recent increase in U.S. tariffs on imports from many trading partners is expected to further intensify these challenges. For Astronics, this could lead to delays in product deliveries and weigh on its operating performance.

In addition, Astronics carries a higher level of debt compared with its peers, as shown by its elevated long-term debt-to-capital ratio. This greater reliance on borrowing raises financial risk, reduces flexibility in managing capital and may limit the company’s ability to navigate periods of economic uncertainty.

Should You Buy ATRO Stock Now?

Astronics presents an attractive case for investors, supported by its discounted valuation, improving earnings outlook, solid growth forecasts and robust performance on the bourses, despite its elevated leverage and industry challenges it faces. Thus, investors looking for exposure to the aerospace and defense space may consider buying this stock at current levels.

Astronics currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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