Axon Enterprise, Inc. AXON is scheduled to release fourth-quarter 2024 results on Feb. 25, after market close. The Zacks Consensus Estimate for earnings is currently pegged at $1.51 per share on revenues of $567.6 million.
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Fourth-quarter earnings estimates have remained stable over the past 60 days. The bottom-line projection indicates an increase of 34.8% from the year-ago number. The Zacks Consensus Estimate for quarterly revenues indicates year-over-year growth of 31.3%.
For 2024, the consensus estimate for AXON’s revenues is pegged at $2.08 billion, implying a surge of 32.8% year over year. Also, the consensus mark for 2024 earnings per share is pegged at $5.29, implying an increase of 27.8% on a year-over-year basis.
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AXON Earnings Surprise History
Axon has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 20.2%. In the last reported quarter, it delivered an earnings surprise of 18.9%.
Earnings Whispers for AXON
Our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat, but that’s not the case here.
AXON has an Earnings ESP of 0.00% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Axon Enterprise, Inc Stock Price and EPS Surprise
Axon Enterprise, Inc price-eps-surprise | Axon Enterprise, Inc Quote
What’s Likely to Shape Axon’s Q4 Results?
Strong demand for TASER devices and virtual reality training services is expected to have driven the top-line performance of the TASER segment in the fourth quarter. The company continues to witness growing popularity for its next-generation TASER 10 products. Also, growth in cartridge revenues, driven by higher adoption of the TASER products, is likely to have boosted the segment’s performance. The Zacks Consensus Estimate for fourth-quarter revenues from the TASER segment is pegged at $217 million, indicating growth of 34.8% year over year.
The Software & Sensors segment is expected to have put up an impressive show in the upcoming earnings, fueled by the addition of new users and associated devices to the Axon network. An increase in the aggregate number of users, driven by increased adoption of software applications, is anticipated to have supported Axon Evidence and cloud services’ growth within the segment.
Growing popularity for its next-generation body-worn camera, Axon Body 4 with upgraded features such as a bi-directional communications facility and a point-of-view camera module option, is also expected to have augmented the segment’s performance. The consensus estimate for the Software & Sensors segment’s revenues is pegged at $221.9 million, indicating a 35% increase from the prior-year quarter’s number.
Axon’s investments in newer areas within the software business, like AI products, real-time operations, drones and robotics, are also likely to have expanded its market share in the fourth quarter. For instance, the company continues to invest in and support DroneSense, an Axon ecosystem partner and leading provider of Drone software.
The company’s focus on strategic collaborations with other companies to expand its product offerings and customer base is also expected to have augmented its top line. In June 2024, Axon entered into a partnership with Skydio (a leading U.S. drone manufacturer) to introduce a comprehensive line of drones in public safety that includes a scalable Drone as First Responder (DFR) solution. The combined offering supports Axon’s DFR programs across its customer base and strengthens its market position in this category.
Near-Term Challenges Prevail for AXON
Despite the positives, AXON is coping with the adverse impacts of escalating costs and expenses. The company has been subject to high costs and expenses related to business integration activities, an increase in headcount costs and stock-based compensation expenses. The increase in operating expenses has been adversely impacting its margins of late. In the first nine months of 2024, Axon’s gross margin declined 180 basis points year over year.
Also, the presence of supply-chain constraints, specifically for electronic components, is anticipated to have inflated the company’s costs and delayed the delivery of products to its customers. Axon has considerable exposure to overseas markets. Given the company’s substantial international operations, foreign currency headwinds are likely to have marred its margins and profitability.
AXON Stock Price Performance & Valuation
AXON shares have exhibited an uptrend in the past six months, leaving behind its peers and the Zacks Aerospace - Defense Equipment industry. Shares of the Conducted Energy Devices provider have risen 45.4%, outperforming the industry’s and the S&P 500’s growth of 10.7% and 11%, respectively. The company’s peers Kratos Defense & Security Solutions, Inc. KTOS and AAR Corp. AIR have gained 20.1% and 0.6%, respectively, in the same period.
AXON Stock Outperforms Industry, S&P 500 & Peers
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Stretched Stock Valuation Remains an Overhang for AXON
AXON’s lofty valuation remains a concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 80.93X, significantly higher than the industry average of 36.35X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. Also, the stock is overvalued compared with its peer, Leonardo DRS, Inc. DRS, which is trading at 28.65X.
Investment Thesis for AXON
With a comprehensive and diversified product portfolio, Axon has been capitalizing on the growing opportunities in the safety, drones and robotics end markets. The company’s strategic collaborations, investments in AI products and the strength in TASER 10 device market bode well ahead of its fourth-quarter earnings.
However, escalating operating costs and supply-chain constraints, specifically for electronic components, are expected to have been spoilsports for its margin performance.
Summing Up
Despite having strong fundamentals, Axon has been witnessing some near-term challenges. Investors should monitor the developments pertaining to the stock closely for a more appropriate entry point. Therefore, it might be prudent to wait for AXON’s earnings report before making an investment decision.
However, those who already own this stock may stay invested as the company's strong estimates, robust share price returns and strength in its businesses offer solid long-term prospects.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
