Raven Industries Inc.
) reported second quarter fiscal 2014 earnings of 23 cents per
share, which dropped 28% year over year and also missed the Zacks
Consensus Estimate of 27 cents per share.
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Sales decreased 8% year over year to $93.4 million, but were in
line with the Zacks Consensus Estimate. Decline in sales in the
Applied Technology and Aerostar division, reflecting the current
constraints on federal spending, offset the slight increase in
Cost of sales decreased 7% year over year to $66.7 million.
Selling, general and administrative expenses increased 12% year
over year to $10.2 million. Operating income plunged 28% year
over year to $12.6 million in the quarter.
Applied Technology: Sales for the segment dipped 2% year over
year to $39 million. Operating income decreased 8% to $11.9
million from $12.9 million in the prior-year quarter, owing to
lower sales and expenses for continued investments in research,
marketing and product development to drive future growth.
Engineered Films: The segment reported sales of $37.3 million, up
1% year over year. Agricultural barrier films grew in
double-digits triggered by sales of fumigation and silage films,
but were offset by lower deliveries of geomembrane films.
However, operating income plunged 30% to $4.8 million due to
higher resin costs as well as lower manufacturing efficiencies
thanks to new line start-up costs.
Aerostar: Sales declined 23% year over year to $20.7 million due
to reduced demand from U.S. agency customers. Segment operating
income plunged 58% to $0.9 million.
Raven Industries ended the second quarter of fiscal 2014 with
cash and cash equivalents of $55.7 million compared with $44.1
million as at the end of the second quarter of fiscal 2013. Cash
flow from operating activities during the first half of fiscal
2014 was $29.7 million compared with $44.5 million in the
prior-year comparable period.
Going forward, Raven will benefit from its acquisition of Vista
Research. Raven expects to return to historic earnings growth
levels in fiscal 2014, driven by benefits from investments made
over the last few years, new product developments and expansion.
The Engineered Films segment will benefit from opportunities with
agricultural barrier films and growing sales for new multi-layer
Raven will benefit from Google's new project for balloon-powered
Internet access, Project Loon. The project will use Raven's
Aerostar-designed and developed high-tech balloons. While the
program is still in its early stages, a successful trial took
place in June involving 30 balloons providing Internet
connectivity to an area covering nearly 10,000 square kilometers.
Raven expects modest revenues from the project in the remainder
of fiscal 2014, with further expectations of significant revenue
growth in the first half of fiscal 2015.
The Aerostar segment will continue to face continued government
uncertainty and sluggish demand. Raven is working to offset
government uncertainty by expanding proprietary technology
revenues including advanced radar systems, high-altitude research
balloons and aerostats to international markets. However, margins
will also be under pressure due to Raven's increased investments
in new initiatives and product development.
South Dakota-based Raven Industries is an industrial manufacturer
providing a variety of products for the agricultural, industrial,
construction and military/aerospace markets. Raven operates
through four business segments: Engineered Films, Electronic
Systems, Applied Technology and Aerostar.
Raven currently carries a Zacks Rank #4 (Sell). Among other
stocks in the same industry,
Hutchison Whampoa Ltd.
) with a Zacks Rank #1 (Strong Buy) and
Federal Signal Corp.
) with a Zacks Rank #2 (Buy).