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Raven's (RAVN) AgSync Buyout to Strengthen Slingshot Platform

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Raven Industries, Inc. has announced that it agreed to acquire Wakarusa, IN-based AgSync, Inc. Financial terms of the transaction have not been disclosed.

Founded in 2008, AgSync is primarily engaged in providing ag logistics software for helping customers deal with woes arising from limited personnel, management of large fleets, disconnected software systems and multiple locations. AgSync’s solutions are primarily used by aerial applicators, seed companies, ag retailers, and forestry and enterprise customers.

AgSync generated revenues of approximately $3 million in the trailing 12 months.

Details of the Buyout

As noted, assets of AgSync will be integrated with Raven’s Applied Technology division. It’s worth mentioning here that the acquisition will expand the segment’s product offerings in the Slingshot platform, making it one of the leading logistics solution providers.

Notably, Raven’s Applied Technology segment primarily engages making and providing innovative precision agriculture products and information management tools. These products help growers reduce costs and improve farm yields. In addition to products, the company provides related services for the products offered. The Applied Technology segment accounted for roughly 28.3% of Raven’s total revenues in third-quarter fiscal 2019 (ended Oct 31, 2018).

The company anticipates closing the transaction on Jan 1, 2019.

Snapshot of Raven’s Inorganic Initiatives

We believe that the above-mentioned transaction is in line with Raven’s policy of acquiring businesses to gain an access to new customers, regions and product lines. Further, the company engages in disposing of non-core assets.

Prior to the AgSync buyout deal, Raven acquired Colorado Lining International, Inc. in September 2017. The acquired assets — integrated with the company’s Engineered Films segment — strengthened the company’s business in the geomembrane market.

However, in the first quarter of fiscal 2019 (ended July 2018), the company sold the client private business of its Aerostar segment. Further, in February 2018, it disposed of 22% of its stake in Site-Specific Technology Development Group, Inc.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $1.3 billion, Raven currently carries a Zacks Rank #3 (Hold). Innovative products, investments in the Latin American market, new contract wins, solid customer relations and lower taxes will be advantageous for the company in the quarters ahead. However, weakness in the sale of hurricane recovery film, as well as increasing raw material costs and higher expenses related to Project Atlas, and the implementation of enterprise resource planning, might hurt its performance.

In the past 7 days, the Zacks Consensus Estimate for earnings has remained unchanged at $1.59 for fiscal 2018 (ending January 2019). These estimates represent year-over-year growth of 39.5%.

Raven Industries, Inc. Price and Consensus
 

Raven Industries, Inc. Price and Consensus | Raven Industries, Inc. Quote

However, the company’s share price has declined 14.7% in the past month. This fall was worse than the industry’s decline of 6.2%.



Some better-ranked stocks in the industry are HC2 Holdings, Inc. (HCHC - Free Report) , Crane Co. (CR - Free Report) , and Federal Signal Corporation (FSS - Free Report) . While HC2 Holdings currently sports a Zacks Rank #1 (Strong Buy), Crane and Federal Signal carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all the above three stocks improved with respect to the current year. Further, the company’s positive earnings surprise in the last reported quarter was 111.90% for HC2 Holdings, 11.72% for Crane and 9.09% for Federal Signal.

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