Industrial goods manufacturer Raven Industries, Inc.RAVN reported healthy second-quarter fiscal 2018 results with net income of $8.2 million or 23 cents per share compared with $4.5 million or 12 cents per share in the year-ago quarter. The nearly two-fold increase in earnings was primarily driven by solid top-line growth. Also, earnings beat the Zacks Consensus Estimate by a penny.
Quarterly sales increased 28.1% year over year to $86.6 million with significant improvement in all the three segments. Sales exceeded the Zacks Consensus Estimate of $81.5 million. Gross profit increased 40.2% year over year to $26.5 million while gross margin expanded 260 basis points (bps) to 30.6%.
Operating income rose to $11.7 million from $6.7 million in the year-earlier quarter for respective margins of 13.5% and 9.9%, driven by strong operating leverage on higher sales volume.
Raven Industries, Inc. Price, Consensus and EPS Surprise
Applied Technology: Sales improved 25.4% year over year to $28.4 million, largely propelled by new product sales, expanded OEM (original equipment manufacturer) relationships and higher sales of direct injection systems.
Operating income for the reported quarter was $6.6 million, up 28.3% from the prior-year quarter owing to improved operating leverage and higher sales volume. Operating margin increased to 23.3% from 22.8%.
Engineered Films: The segment reported sales of $49 million, up 33.8% year over year, driven by higher sales into the Geomembrane market, with the Industrial and Agriculture markets also significantly contributing to growth.
Operating income rose 43.4% to $9.6 million due to higher sales volumes and strong operating leverage. Segment operating margin expanded 130 bps to 19.5%, driven by improved capacity utilization and continued spending discipline.
Aerostar: Sales in the segment were $9.4 million, reflecting an 11.3% increase from the prior-year quarter, driven by growth in stratospheric balloon platform.
The segment reported operating income of $1.4 million against operating loss of $0.3 million in the year-ago quarter. The turnaround was driven by stringent cost-reduction activities while maintaining focus on strategic R&D efforts.
Raven ended the quarter with cash and cash equivalents of $55.2 million compared with $40.1 million in the prior-year quarter. The company generated cash flow from operations of $19.9 million for the first six months of fiscal 2018 compared with $25.6 million in the year-ago period.
Raven expects to exceed prior-year sales and adjusted operating income in fiscal 2018. The company continues to invest for the intermediate and long term. The company is increasing its investment in research and development activities to continue its new product momentum, and keeps looking for additional strategic acquisitions.
Raven currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Federal Signal Corporation FSS and Honeywell International Inc. HON , both carrying a Zacks Rank #2 (Buy) and Hitachi, Ltd. HTHIY sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Federal Signal topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 9.5%.
Honeywell has a long-term earnings growth expectation of 9.5%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 2.1%.
Hitachi has a long-term earnings growth expectation of 13%. It topped estimates thrice in the trailing four quarters with a stellar average positive earnings surprise of 108.1%.
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