A month has gone by since the last earnings report for Raven Industries, Inc. . Shares have added about 2.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is RAVN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Raven Misses on Q4 Earnings, FY19 Outlook Bullish
Raven reported strong fourth-quarter fiscal 2018 results, with GAAP earnings of $8.4 million or 23 cents per share compared with $4.4 million or 12 cents per share in the year-ago quarter. The 92% increase in GAAP earnings was primarily driven by significant operating leverage within Engineered Films.
GAAP earnings for fiscal 2018 more than doubled to $41 million or $1.13 per share from $20.2 million or 56 cents per share a year ago, owing to significant top-line growth in all three operating segments.
For the fiscal fourth quarter, adjusted earnings per share increased to 24 cents from 12 cents in the year-ago quarter. However, the reported earnings missed the Zacks Consensus Estimate by 7 cents.
Operational Update
Fiscal fourth quarter revenues increased 39% to $95.8 million from $68.9 million in the year-ago quarter, with each of the three segments reporting double-digit growth led by Engineered Films at 61% year-over-year improvement in sales. However, quarterly revenues slightly missed the Zacks Consensus Estimate of $97 million. Gross profit for the quarter increased 54.1% year over year to $29.8 million while gross margin improved to 31.1% from 28%.
Revenues for fiscal 2018 increased 36% year over year to $377.3 million from $277.4, driven by significant sales growth across all three operating divisions, with Engineered Films achieving growth of more than 50% year over year. Delivery of hurricane recovery film to support relief efforts and the acquisition of Colorado Lining International, Inc. contributed sales of $24.2 million and $13.1 million, respectively
Operating income for the fiscal fourth quarter increased 81.9% year over year to $11.4 million from $6.3 million in the year-earlier quarter. Operating margin increased 280 basis points (bps) to 11.9% of net sales from 9.1% in the year-ago quarter. The significant improvement in profitability was principally driven by Engineered Films' improved margins and leverage of corporate expenses over significantly higher sales.
Segmental Performance
Applied Technology: Sales from this segment improved 17.6% year over year to $30.5 million. Domestic sales were up 21.1% and international sales jumped 6.2%. Despite continued lackluster market dynamics, the division continues to drive sales growth by successfully introducing new products and building on key OEM relationships.
Operating income for the segment was $5.8 million, reflecting a decrease of 8.7% from the prior-year quarter, owing to higher expenses and investments. Operating margin decreased 550 bps year over year to 19.1% of net sales from 24.6% in the year-ago quarter.
Engineered Films: The segment reported strong sales of $55.6 million, reflecting an increase of 61% year over year, driven by organic growth in the geomembrane and industrial markets. Delivery of hurricane recovery film to support relief efforts and the acquisition of Colorado Lining International contributed revenues of $15.8 million and $7.9 million, respectively.
Operating income significantly improved 125.2% to $11.9 million from $5.3 million in the year-earlier quarter, due to strong operating leverage on higher sales volume. Division operating margin increased 620 bps year over year to 21.5% from 15.3% in the year-earlier quarter owing to operational efficiency gains and higher sales volume improving capacity utilization.
Aerostar: Sales in the segment were $9.8 million, increasing 11.8% year over year, driven by growth in the stratospheric balloon platform. However, the segment incurred operating loss of $43 million against operating profit of $244 million in the year-ago quarter due to unfavorable mix and contract timing. Results were not consistent with company's long-term expectations.
Financial Update
Raven ended the fiscal year with cash and cash equivalents of $40.5 million compared with $50.6 million in the prior year. Cash flow from operations amounted to $45 million compared with $48.6 million a year ago.
Moving Forward
Raven expects to exceed prior-year sales and adjusted operating income in fiscal 2019. The company is evaluating strategic acquisitions and continues to invest in additional manufacturing capacity, research and technology development activities to enhance its core product lines. Its goal is to generate 10% annualized earnings growth, excluding unusual and generally non-recurring items, in the long term.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. There has been one revision higher for the current quarter. Last month, the consensus estimate has shifted by 28.6% due to these changes.
Raven Industries, Inc. Price and Consensus
VGM Scores
At this time, RAVN has a nice Growth Score of B, however its Momentum is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise RAVN has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Raven (RAVN) Up 2.4% Since Its Last Earnings Report?
A month has gone by since the last earnings report for Raven Industries, Inc. . Shares have added about 2.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is RAVN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Raven Misses on Q4 Earnings, FY19 Outlook Bullish
Raven reported strong fourth-quarter fiscal 2018 results, with GAAP earnings of $8.4 million or 23 cents per share compared with $4.4 million or 12 cents per share in the year-ago quarter. The 92% increase in GAAP earnings was primarily driven by significant operating leverage within Engineered Films.
GAAP earnings for fiscal 2018 more than doubled to $41 million or $1.13 per share from $20.2 million or 56 cents per share a year ago, owing to significant top-line growth in all three operating segments.
For the fiscal fourth quarter, adjusted earnings per share increased to 24 cents from 12 cents in the year-ago quarter. However, the reported earnings missed the Zacks Consensus Estimate by 7 cents.
Operational Update
Fiscal fourth quarter revenues increased 39% to $95.8 million from $68.9 million in the year-ago quarter, with each of the three segments reporting double-digit growth led by Engineered Films at 61% year-over-year improvement in sales. However, quarterly revenues slightly missed the Zacks Consensus Estimate of $97 million. Gross profit for the quarter increased 54.1% year over year to $29.8 million while gross margin improved to 31.1% from 28%.
Revenues for fiscal 2018 increased 36% year over year to $377.3 million from $277.4, driven by significant sales growth across all three operating divisions, with Engineered Films achieving growth of more than 50% year over year. Delivery of hurricane recovery film to support relief efforts and the acquisition of Colorado Lining International, Inc. contributed sales of $24.2 million and $13.1 million, respectively
Operating income for the fiscal fourth quarter increased 81.9% year over year to $11.4 million from $6.3 million in the year-earlier quarter. Operating margin increased 280 basis points (bps) to 11.9% of net sales from 9.1% in the year-ago quarter. The significant improvement in profitability was principally driven by Engineered Films' improved margins and leverage of corporate expenses over significantly higher sales.
Segmental Performance
Applied Technology: Sales from this segment improved 17.6% year over year to $30.5 million. Domestic sales were up 21.1% and international sales jumped 6.2%. Despite continued lackluster market dynamics, the division continues to drive sales growth by successfully introducing new products and building on key OEM relationships.
Operating income for the segment was $5.8 million, reflecting a decrease of 8.7% from the prior-year quarter, owing to higher expenses and investments. Operating margin decreased 550 bps year over year to 19.1% of net sales from 24.6% in the year-ago quarter.
Engineered Films: The segment reported strong sales of $55.6 million, reflecting an increase of 61% year over year, driven by organic growth in the geomembrane and industrial markets. Delivery of hurricane recovery film to support relief efforts and the acquisition of Colorado Lining International contributed revenues of $15.8 million and $7.9 million, respectively.
Operating income significantly improved 125.2% to $11.9 million from $5.3 million in the year-earlier quarter, due to strong operating leverage on higher sales volume. Division operating margin increased 620 bps year over year to 21.5% from 15.3% in the year-earlier quarter owing to operational efficiency gains and higher sales volume improving capacity utilization.
Aerostar: Sales in the segment were $9.8 million, increasing 11.8% year over year, driven by growth in the stratospheric balloon platform. However, the segment incurred operating loss of $43 million against operating profit of $244 million in the year-ago quarter due to unfavorable mix and contract timing. Results were not consistent with company's long-term expectations.
Financial Update
Raven ended the fiscal year with cash and cash equivalents of $40.5 million compared with $50.6 million in the prior year. Cash flow from operations amounted to $45 million compared with $48.6 million a year ago.
Moving Forward
Raven expects to exceed prior-year sales and adjusted operating income in fiscal 2019. The company is evaluating strategic acquisitions and continues to invest in additional manufacturing capacity, research and technology development activities to enhance its core product lines. Its goal is to generate 10% annualized earnings growth, excluding unusual and generally non-recurring items, in the long term.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. There has been one revision higher for the current quarter. Last month, the consensus estimate has shifted by 28.6% due to these changes.
Raven Industries, Inc. Price and Consensus
Raven Industries, Inc. Price and Consensus | Raven Industries, Inc. Quote
VGM Scores
At this time, RAVN has a nice Growth Score of B, however its Momentum is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than growth investors.
Outlook
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise RAVN has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.