Will Raven be Able to Hedge Energy Market Volatility? - Analyst Blog

We issued an updated research report on Raven Industries Inc.RAVN on Apr 13, 2015. Raven's performance is riddled with headwinds like declining oil prices in the energy market. Additionally, fluctuation in exchange rates, increased competition and weakness in agriculture equipment market will impact the company's earnings.

Raven's earnings and revenues declined in the fourth quarter of fiscal 2015 due to weakness in the agriculture equipment market. The decline mainly resulted from significant contraction in demand across the company's Applied Technology division's agriculture end markets.

The company remains concerned about the end-market conditions for Applied Technology and expects it to deteriorate further in the first quarter and through fiscal 2016. Several original equipment manufacturers (OEM) are also cutting down on the production levels and lowering their outlook for fiscal 2016.

Notably, Raven is facing significant headwinds in the energy market. The company's Engineered Films Division consumes a large amount of plastic resin, the cost of which reflects market prices for natural gas and oil. For Engineered Films, the recent decline in oil price impacted exploration activity, tempering demand for the division's pit liners. Accordingly, volatility in oil and natural gas prices may affect the cost of goods sold by the company, which in turn could adversely mar sales and profits.

Additionally, the company's financial results could be affected by changes in trade, monetary and fiscal policies, and laws and regulations. Moreover, foreign exchange volatility, increased competition and high input costs are likely to impede Raven's growth plans.

Moreover, this Zacks Rank #4 (Sell) stock has witnessed downward estimate revisions over the last 60 days. Also, the Zacks Consensus Estimate for 2016 decreased roughly 2.3% to 85 cents per share. Raven has missed the Zacks Consensus Estimate in the trailing four quarters with a negative average surprise of 28.73%.

Stocks That Warrant a Look

Better-ranked stocks in the same space include Carlisle Companies Inc. CSL , Compass Diversified Holdings CODI and Icahn Enterprises, L.P. IEP . All these stocks carry a Zacks Rank #2 (Buy).

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RAVEN INDS INC (RAVN): Free Stock Analysis Report

ICAHN ENTERPRIS (IEP): Free Stock Analysis Report

CARLISLE COS IN (CSL): Free Stock Analysis Report

COMPASS DIVERSF (CODI): Free Stock Analysis Report

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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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