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Raven (RAVN) Q1 Earnings In Line With Estimates, View Strong

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Raven Industries, Inc. (RAVN - Free Report) reported strong first-quarter fiscal 2019 results, with adjusted earnings per share improving 47% year over year to 50 cents. The figure was in line with the Zacks Consensus Estimate.

The figure excluded a non-operating gain on the sale of the Raven’s stake in SST, an expense associated with a gift to South Dakota State University and Project Atlas-related expenses. It was also adjusted for a tax benefit that the company enjoyed in the reported quarter.

Including all of the above items, net income came in at $22.1 million or 61 cents per share, compared with $12.3 million or 34 cents per share in the year-ago quarter. The 92% surge in reported earnings was driven by strong sales growth in the Engineered Films division.

Operational Update 

Fiscal first-quarter revenues increased 18.8% to $111.1 million, with Engineered Films and Aerostar segments reporting double-digit growth. Gross profit rose 25.2% year over year to $40 million and gross margin improved to 36% from 34.2% in the prior-year quarter. Delivery of hurricane recovery film contributed $8.9 million to sales during the reported quarter.

Operating income increased 18.2% year over year to $21.5 million. The significant improvement in profitability was driven by strong operating performance across the company’s three divisions.

Raven Industries, Inc. Price, Consensus and EPS Surprise


Segmental Performance

Applied Technology: Sales in the segment were $40.4 million, flat year over year. The segment sustained strong sales in the prior-year quarter despite persistently low commodity prices. Domestic sales were down 2.4% year over year, while international sales jumped 6.6%. Despite persistent lackluster market dynamics, the division continues to drive sales growth by successfully introducing new products and building on key OEM relationships.

Operating income in the segment was $15.9 million, up 18.5% from the prior-year quarter. Operating margin increased 620 basis points (bps) year over year to 39.4% of net sales.

Engineered Films: The segment reported strong sales of $60 million, up 37.7% year over year and driven by organic growth. Delivery of hurricane recovery film to support relief efforts and the acquisition of Colorado Lining International contributed revenues of $8.9 million and $7.7 million, respectively.

Operating income significantly improved 51.3% to $13.2 million from $8.7 million in the year-earlier quarter, courtesy of strong operating leverage and higher sales volume. Division operating margin increased 200 bps year over year to 22%, owing to operational efficiency gains and higher sales volume improving capacity utilization.

Aerostar: Sales in the segment were $10.9 million, increasing 13.5% year over year, driven by growth across core product lines. During the quarter, the segment sold its client private business to enhance focus on core business.

The segment generated operating income of $2.8 million compared with operating profit of $1.4 million in the year-ago quarter. The uptick was driven by increased sales volume and favorable sales mix. The division’s operating margin increased 1,090 bps year over year to 25.7%.

Financial Update

Raven ended the fiscal first quarter with cash and cash equivalents of $51.3 million compared with $50.5 million in the prior-year quarter. Cash flow generated from operations amounted to $13.6 million compared with $7.7 million in the year-ago quarter.

Moving Forward

Raven expects to beat prior-year quarter’s 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 augment core product lines. Its goal is to generate 10% annualized earnings growth, excluding unusual and generally non-recurring items in the long term.

Zacks Rank & Stocks to Consider

Raven presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth a look include Danaher Corporation (DHR - Free Report) , KBR, Inc. (KBR - Free Report) and Jacobs Engineering Group Inc. (JEC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Danaher surpassed estimates in each of the preceding four quarters, with an average positive earnings surprise of 4.1%.

KBR surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 14.1%.

Jacobs Engineering outpaced estimates in each of the preceding four quarters, with an average earnings surprise of 12.3%.

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