Earnings Preview: Raven Industries - Analyst Blog

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Raven Industries Inc. ( RAVN ) is scheduled to announce its third quarter fiscal 2013 results on November 20, 2012. The current Zacks Consensus Estimate for the quarter is 34 cents, projecting a year-over-year growth of 10%. The Zacks Consensus Revenue Estimate is $102 million for the quarter under discussion.

With respect to earnings surprise, Raven has outperformed the Zacks Consensus Estimate in three of the last four quarters. The average earnings surprise was 9.13%, implying that the company has surpassed the Zacks Consensus Estimate by the same magnitude over the same period.

Previous Quarter Recap

Raven Industries' second quarter 2013 earnings per share decreased 3% year over year to 32 cents per share, falling short of the Zacks Consensus Estimate of 38 cents. Results were affected by continued volatility in the Aerostar segment.

Revenues in the quarter were $101.7 million, up 13% from the year-ago period. Revenues marginally missed the Zacks Consensus Estimate of $102 million. The year-over-year upside in sales was attributable to the double-digit growth across all segments.

Estimate Revision Trend

For the third quarter as well as fiscal 2012, there has been no movement in estimates over the 30 days as well as in the past 7 days. The lack of movement suggests that the analysts do not expect any major catalyst driving the quarter's results.

Magnitude of Estimate Revisions

The consensus earnings estimate for the third quarter of fiscal 2012 has remained at 34 cents over the past 90 days. For fiscal 2013, the estimate has gone down by 6 cents to $1.51 following the second quarter results. The estimate has remained at $1.51 since then.

Our View

In the last quarter, sales and operating income in Raven's Engineered Films segment were record high, driven by high demand for the geo membrane films. Demand for geo membrane films, meant for environmental protection, is on the rise as customers are keen on protecting water and other environmental resources for a sustainable future. This will provide a boost to Raven Industries' revenues moving ahead.

Vista Research, which Raven acquired in January 2012, has high growth potential. Vista Research has recently signed a new $6 million contract with the U.S. government to support and further explore the applications of its radar technology. Moreover, the company is also focusing on increasing the customer base of Vista both in the domestic and international markets.

In addition, Raven aims at enhancing its product portfolio to increase its market share in the industry. The company introduced many new products in the applied technologies segment and has decided to further invest in product development in this segment in fiscal 2013 to meet the increasing demand of its customers.

On the flipside, increased capital spending will put pressure on margins moving forward. Moreover, R&D expenses in the Applied Technology and Aerostar division are also projected to increase. But its margins would remain constrained due to drought conditions in the U.S. The company currently retains a Zacks #3 Rank (short-term Hold rating).

South Dakota-based Raven Industries Inc. is an industrial manufacturer providing a variety of products for the agricultural, industrial, construction and military/aerospace markets. The company operates through four business segments: Engineered Films, Electronic Systems, Applied Technology and Aerostar. GracoInc. ( GGG ) and Spartech Corp. ( SEH ) are peers of Raven.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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