Defense Stock Hits Multiyear High As Earnings Surge 178%

A recent escalation in the U.S.-Iran conflict has clearly been a catalyst for aerospace and defense name** Innovative Aerosystems** (ISSC) as shares hit levels last seen in April 2007. But the stock also recently stood atop of Investor’s Business Daily’s growth 50 list, reflecting underlying fundamental strength, helped no doubt by its ideal ratings.

Shares gapped up on first-quarter earnings on Feb. 12 and have posted weekly gains since. The relative strength line has been rising as well, showing that the stock is performing better than the benchmark S&P 500 index.

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The aerospace and defense parts manufacturer announced earnings of 25 cents per share for its December-ended quarter, reflecting a growth of 178% from the prior year. The company realized triple-digit earnings growth for the third time in four quarters and accelerating profit growth for the second continuous quarter.

Revenue grew 37% to $21.8 million as demand for aftermarket services in its commercial aviation segment grew. The company’s backlog sat at $75 million as of Dec. 31.

For the current quarter, estimates indicate a 43% decline in earnings of 17 cents per share with sales growing 37% to $21.6 million. Analysts also see a 22% decline in earnings growth for the full year or 73 cents in earnings per share.

In 2027, they see growth picking up with earnings of 83 cents per share — a 14% increase from the current year.

Defense Stock: 125% Gain Since Breakout

Innovative Aerosystems makes navigation systems, flight deck displays, and the hardware and software for flight control. The company rebranded itself in October, replacing its earlier moniker, “Innovative Solutions & Support.”

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The stock has rallied more than 125% since a breakout in December at a buy point of 12.79 with year-to-date gains of more than 50%. That reflects robust performance in addition to dramatically improved fundamentals.

Innovative Aerosystems holds top-notch ratings according to metrics tracked by Investor’s Business Daily.

Buyers have likely turned to the aerospace and defense name as a result of the U.S.-Iran conflict. The Aerospace/Defense group holds 19th place among IBD’s 197 industry groups. Six members, including Innovative Aerosystems, are featured in the IBD 50. Innovative also holds first place in its group, according to IBD Stock CheckUp.

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Funds Lift Stock

The Composite Rating is an ideal 99 while its Earnings Per Share Rating and Relative Strength Rating also place Innovative among the top 1% of all stocks in the IBD database for both earnings growth and price performance.

It held the No. 1 spot on the IBD 50 list up until Friday, when Micron Technology (MU) reassumed that spot. Innovative now ranks third on the list behind Micron and Comfort Systems USA (FIX).

Its Accumulation/Distribution Rating of A- reveals that much of its rally in the recent 13 weeks has been spurred by institutional investors. Meanwhile overall demand for the stock is healthy, reflected in the Up/Down Volume Ratio of 1.3.

The stock’s longer-term earnings stability score of 26 mars an otherwise perfect all-around score. IBD recommends an earnings stability reading of less than 25 since a lower reading reflects more stable earnings over the longer run.

Mutual funds own 20% of outstanding shares. More funds have added the stock to their holdings in the recent six quarters.

Please follow VRamakrishnan on X/Twitter for more news on the stock market today.

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