Flight pattern: Aerovironment takes off as public company.

JUST a few short months after its initial public offering, Aerovironment Inc. is getting the kind of investor and analyst attention that other new public companies could only envy.

Then again, the Monrovia maker of unmanned aircraft and quick-charge systems for electric vehicle batteries has its advantages.

Not only is it in some of the hottest sectors around--defense and alternative power--but it was founded by flying legend Paul MacCready, who designed the first man-powered aircraft across the English Channel in 1979.

Perhaps more importantly, it was able to perform in the spotlight last month during its first quarterly report, releasing earnings of 57 cents a share that were up almost 100 percent, beating Wall Street's and its own expectations.

"It's an exciting market and they've got exciting products," said Brian Gesuale, a defense technology analyst with Raymond James & Associates Inc.

Those earnings followed a bang up initial public offering in January, which saw the 7.7 million shares offered at $17 close at nearly $24 on the first day of trading.

The company earned some $81 million from the successful offering and could use it. It's in two highly capital- and research-intensive sectors that will require a high level of R&D spending. But 36 years after its founding as a developer of human-powered flying machines, it seems finally to have found the lift it's needed in hand-launched unmanned aircraft the military can't seem to get enough of.

"The business is growing very rapidly," said Tim Conver, chief executive of Aerovironment. "Unmanned aerial vehicles continue to be adopted by a broader and broader set of U.S. military segments."

Particular advantages

The lightweight, bird-sized airplanes are gaining favor among soldiers who tout the device's surveillance capabilities--relaying audio and video information from tiny cameras--while keeping troops out of harm's way. The plane can be assembled in less than two minutes and reach the stratosphere, giving troops an immediate bird's-eye view of their surroundings in the latest advancement in the evolution of ground warfare.

Last December, the company secured a contract to supply as many as 1,000 of the devices to the Air Force. The Army, Marine Corps and Special Operations Command also have contracts with Aerovironment, which generate upward of 80 percent of the company's revenue.

"That segment of the market has grown dramatically in the last few years," Conver said.

The rest of the company's revenues are derived from its PosiCharge system, which provides fast recharges to batteries that power fork lifts and other industrial vehicles regardless of the battery type or manufacturer. However, the charge system so far only accounts for 20 percent of revenues and may not be able to keep up with unmanned aircraft in terms of growth.

The company has declined to say exactly how many aircraft they have sold, but said the military contracts ranged from several hundred aircraft to almost 2,000.

The Air Force has been experimenting with unmanned aircraft for decades, but with the recent advances in small unmanned airplane technology Air Force researchers have rededicated their resources to the devices.

In 2005, they released a 40-page "strategic vision" document detailing their intentions with unmanned aircraft technology. "Small UAVs are rapidly growing in type and offer a versatile family of capabilities. The Air Force will integrate unmanned aviation with existing and future air and space systems," the report said.

Though the Department of Defense contracts are terminable at will and are highly dependent on the uncertain future of U.S. military operations, analysts believe the valuable reconnaissance provided by the devices should keep interest strong.

Aerovironment currently makes five unmanned aircraft models. The most popular one, the Raven, weighs just over 4 lbs., has a wingspan of about 4 ft. and can reach speeds of 60 mph.

But Aerovironment is certainly not alone in the field. More than 100 companies and university researchers have worked on unmanned aerial vehicle projects, but currently Aerovironment is the only contracted supplier of miniature unmanned aircraft to the country's armed forces. "Aerovironment is a leading player in the rapidly growing unmanned aerial vehicle market," Gesuale said.

The military makes use of some larger, glider-sized unmanned aerial vehicles, including Northrop Grumman Corp.'s Global Hawk and Boeing Co.'s Predator, but they have limited applications on the battlefield because they require central command centers and runways. Aerovironment's small aircraft, which can cost as little as $35,000, also hold budgetary advantages over the larger planes, which can cost millions of dollars each.

Hot wings

The innovative flying vehicles are a direct outgrowth of the company's long history of aviation experimentation.

MacCready, who at 80 is still the company's chairman, trained as a pilot as a teenager. He was the first American to win the World Soaring Championship in 1956 and piloted the first man-powered aircraft across the English Channel in 1979. More recently, he was included on the list of "The Century's Greatest Minds" by Time magazine.

In 1971, he founded Aerovironment, which initially focused on research and development of man-powered flying machines. But by the 1980s it was well into unmanned aerial vehicles, the first of which it sold in the late 1980s. The device's use was limited initially, but advancements in miniature camera technology have greatly expanded the aircraft's potential.

But it was not until the recent U.S. invasion of Afghanistan and the subsequent invasion of Iraq that miniature unmanned aerial vehicles achieved widespread use in the battlefield.

In the fight against insurgents in the Middle East, the military has been transitioning to a more agile and mobile force, which has made versatile, lightweight tools and new communication technologies essential to troops in the battlefield, said Steve Gitlin, marketing director for Aerovironment.

"Those were significant drivers for demand of the small unmanned aerial vehicle systems," he said.

The company also wants to expand its customer base beyond the military. Aerovironment sees applications for the Federal Bureau of Investigations, the Coast Guard, the National Guard, police officers, first responders and general commercial customers.

Gitlin also said the aircraft could help with search and rescue operations and border patrol. Last year, army officials used the Raven aircraft to provide security during a Carrie Underwood concert on the Redstone Arsenal army base in Alabama.

However, while the company has attracted lots of attention on Wall Street--at least six analysts cover it, not bad for a company with annual earning under $150 million and a market cap of just $431 million--for the time being it may be played out for investors.

The company projects a 20 to 25 percent rise in revenue to about $174 million for its current fiscal year end, which will end next April. But with the company's shares rising almost 40 percent on its first day of trading, those sorts of expectations already appear built into the stock price, which has languished since the IPO.

Shares closed at $22.32 on April 11, down more than $1 from its high this year. Moreover, four of six analysts rate it a hold, and only two a buy or strong buy, indicating there's a feeling the company's revenues need to catch up to its stock price.

The stock was trading close to 26 times earning last week--a lofty level considering rock solid Northrop Grumman, a prime defense contractor, was only at 17.