Raven Industries (RAVN) Poised to Combat Market Weakness

On Jun 23, 2016, we issued an updated research report on Raven Industries Inc. RAVN, a manufacturer of a variety of products for customers in the industrial, construction and military/aerospace markets.

Raven's estimates have remained stable ahead of its second-quarter fiscal 2017 results. The company has a mixed record of earnings surprises in the recent quarters.

Demand in the precision agriculture market is expected to decline for the third straight year. Farmer sentiment is weak and productivity investments are being delayed. Depressed oil and gas prices are affecting drilling activity. Further, defense spending continues to be curtailed which will be a headwind for the Aerostar segment.

Despite these setbacks, Raven expects the Applied Technology segment to benefit from steady market conditions, new product introductions and continued OEM sales improvement throughout the rest of the year, both domestically and internationally. The company is optimistic that the Engineered Films segment shall return to growth this year on the back of its efforts to sell the capacity of its new production line into the Industrial and Geomembrane markets. Increasing strength in the construction and industrial markets shall also accelerate the growth of this segment.

Meanwhile, Raven strives to cut costs, reduce inventory levels, and generate value engineering benefits. Given its first-quarter performance that registered a 15% improvement in earnings, Raven believes that it is on track to deliver consistently robust revenues and adjusted operating profit, with a potential opportunity to achieve modest growth.

Raven currently carries a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Some better-ranked stocks in the same space are ACCO Brands Corporation ACCO, Altra Industrial Motion Corp. AIMC and SPX FLOW, Inc. FLOW. All of these stocks sport a Zacks Rank #1 (Strong Buy).

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