Archer Aviation Inc. ACHR is slated to report fourth-quarter 2024 results on Feb. 27, 2025, after market close.
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The Zacks Consensus Estimate for revenues is pegged at $0.50 million. The consensus mark for the bottom line is pegged at a loss of 24 cents per share, suggesting an improvement from a loss of 29 cents in the prior-year quarter. The bottom-line estimate has moved up in the past 60 days.
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Archer Aviation has a decent earnings surprise history. Its earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, met once and missed in the other, the average surprise being 6.89%.
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Earnings Whispers
Our proven model does not conclusively predict an earnings beat for ACHR 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.
Archer Aviation has a Zacks Rank #4 (Sell) and an Earnings ESP of +9.59%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Key Factors to Consider
In November 2024, Archer Aviation collaborated with Soracle Corporation, a joint venture newly established by Japan Airlines and Sumitomo Corporation, to bring advanced air mobility (AAM) services to Japan. Successful delivery of these services might have contributed favorably to the company’s fourth-quarter revenues.
During the third quarter of 2024, Archer Aviation delivered its first Midnight aircraft to the U.S. Air Force as part of the AFWERX Agility Prime contract, valued up to $142 million. This is also likely to have contributed favorably to ACHR’s quarterly revenues.
With the company continuing to ramp up for manufacturing and testing capabilities as it builds additional Midnight aircraft and their associated powertrains, it is likely to have incurred notable development expenses for the program’s development. This, along with an increase in labor and materials spent due to its planned ramp of manufacturing activity, is likely to have increased Archer Aviation’s operating expenses, thereby weighing on its quarterly earnings performance.
However, the technological advancement that ACHR has achieved over the past few quarters while developing the Midnight jet is likely to have provided it with operational efficiency, thereby aiding its quarterly bottom line.
In December 2024, ACHR received the certificate of occupancy for its high-volume manufacturing facility, ARC, which is connected to the Covington Municipal Airport in Georgia. We may expect the upcoming fourth-quarter results to reveal further updates about this facility, where the production might have started.
Price Performance & Valuation
ACHR’s shares have exhibited an upward trend, gaining a notable percentage over the past year. Specifically, the stock soared 85.5% in the timeframe, outperforming the Zacks aerospace-defense industry’s decline of 6.3%. It also outpaced the broader Zacks Aerospace sector’s return of 0.8% as well as the S&P 500’s gain of 19.6%.
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Other notable stocks from the same industry have also gained over the past year. Shares of Embraer ERJ, RTX Corp. RTX and Lockheed Martin LMT have rallied 125.2%, 36.9% and 2.6%, respectively, over the past year.
A quick sneak peek at the company’s return on equity (ROE) over the past year compared to that of its industry shows a dismal scenario. ACHR’s ROE is lower than that of its industry. A negative ROE indicates that a company is making a loss, as is evident from its recent quarterly results.
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Investment Thesis
ACHR offers promising near-term prospects, but whether its business will be sustainable in the long run remains uncertain. This is because the eVTOL aircraft market is still in its early stages, and ACHR's success depends not only on its ability to design, develop and certify eVTOL aircraft but also on how the demand for these vehicles evolves.
Public acceptance of eVTOLs as an alternative to traditional transport methods could face hurdles related to safety, noise and affordability concerns. Without widespread recognition, ACHR's growth potential may be constrained.
Additionally, ACHR and other aerospace manufacturers are navigating industry challenges, including supply-chain disruptions, rising jet fuel prices and a shortage of skilled labor. Such factors could hinder ACHR’s ability to complete its projects on time. A significant delay in obtaining FAA certification might necessitate raising additional capital beyond its current reserves, further impacting the timeline for revenue generation. Considering these uncertainties, ACHR faces market and operational risks that could affect its ability to establish a sustainable presence in the evolving eVTOL industry.
Should You Buy ACHR Before Feb. 27?
To conclude, investors interested in ACHR should refrain from adding this stock to their portfolio before Thursday, considering its poor ROE as well as industry challenges. The company might disappoint with its fourth-quarter results, considering its quarterly loss per share estimates as well as an unfavorable Zacks rank.
Moreover, ACHR currently has a VGM Score of F, which is another indicator of the stock’s poor performance.
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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
Embraer-Empresa Brasileira de Aeronautica (ERJ) : Free Stock Analysis Report
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Archer Aviation Inc. (ACHR) : Free Stock Analysis Report
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.
