Aerospace and defense company Redwire (NYSE:RDW) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 30.1% year on year to $61.4 million. On the other hand, the company’s full-year revenue guidance of $570 million at the midpoint came in 32.2% above analysts’ estimates. Its GAAP loss of $0.09 per share was 76.3% above analysts’ consensus estimates.
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Redwire (RDW) Q1 CY2025 Highlights:
- Revenue: $61.4 million vs analyst estimates of $74.54 million (30.1% year-on-year decline, 17.6% miss)
- EPS (GAAP): -$0.09 vs analyst estimates of -$0.38 (76.3% beat)
- Adjusted EBITDA: -$2.27 million vs analyst estimates of -$1.75 million (-3.7% margin, relatively in line)
- The company reconfirmed its revenue guidance for the full year of $570 million at the midpoint
- EBITDA guidance for the full year is $87.5 million at the midpoint, above analyst estimates of $36.59 million
- Operating Margin: -23.3%, down from -4.1% in the same quarter last year
- Free Cash Flow was -$46.87 million, down from $1.20 million in the same quarter last year
- Backlog: $291.2 million at quarter end
- Market Capitalization: $871.8 million
Company Overview
Based in Jacksonville, Florida, Redwire (NYSE:RDW) is a provider of systems and components used in space infrastructure.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last four years, Redwire grew its sales at an incredible 42.1% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Redwire’s annualized revenue growth of 22.4% over the last two years is below its four-year trend, but we still think the results suggest healthy demand. 
This quarter, Redwire missed Wall Street’s estimates and reported a rather uninspiring 30.1% year-on-year revenue decline, generating $61.4 million of revenue.
Looking ahead, sell-side analysts expect revenue to grow 83.1% over the next 12 months, an improvement versus the last two years. This projection is eye-popping and implies its newer products and services will spur better top-line performance.
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Operating Margin
Redwire’s high expenses have contributed to an average operating margin of negative 16.8% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
Analyzing the trend in its profitability, Redwire’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.
In Q1, Redwire generated a negative 23.3% operating margin. The company's consistent lack of profits raise a flag.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Redwire’s earnings losses deepened over the last four years as its EPS dropped 38.9% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Redwire’s low margin of safety could leave its stock price susceptible to large downswings.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Redwire, its two-year annual EPS declines of 6.6% show it’s still underperforming. These results were bad no matter how you slice the data.
In Q1, Redwire reported EPS at negative $0.09, up from negative $0.17 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Redwire’s full-year EPS of negative $2.26 will reach break even.
Key Takeaways from Redwire’s Q1 Results
We were impressed by how significantly Redwire blew past analysts’ EPS expectations this quarter. We were also glad its full-year EBITDA guidance trumped Wall Street’s estimates. On the other hand, its revenue missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock traded up 15.9% to $13.10 immediately following the results.
Redwire put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.