Raven Outlines Segment Growth Strategies - Analyst Blog

Industrial manufacturer offering a variety of products for agricultural, industrial, construction and aerospace markets, Raven Industries Inc. RAVN divulged its growth drivers for fiscal 2015 during its fourth-quarter fiscal 2014 conference call. Raven's President and Chief Executive Officer, Dan Rykhus stated that fiscal 2014 was a “year of progress” as the company has focused on areas that will set the stage for long-term growth.

Raven has been shifting its focus to more proprietary product lines from its lower-margin, low-growth contract manufacturing business. The company also invested heavily in research and development and capital expenditures to support its product and growth strategy. Though this had an impact on the company's performance during fiscal 2014, it will reap benefits in the long term.

Rykhus divulged that for 2015, the company's priorities are growing revenues from its situational awareness and lighter-than-air product lines in Aerostar, driving Applied Technology through international market expansion, new products and broadening original equipment manufacturer (OEM) relationships, and bringing high-value plastic film applications to each of its Engineered Films markets.

To elaborate, at the segment level, in order to deliver growth in the Engineered Films segment, Rykhus stated that the company will look for opportunities in its existing markets, including Barrier Films for Agriculture, multi-layer environmental solutions and industrial bulk packaging. Raven continues to develop pioneering high-value solutions and explore possible opportunities in alternative energy. The company also strives to maintain its focus on operational excellence and pricing in order to improve operating margin.

In the Applied Technology segment, Raven continues to focus on developing and strengthening relationships with its OEM partners, expanding market share and extending its innovative technology to a wider range of customers. Rykhus particularly pointed out a budding interest in big data analytics in agriculture. This will be an eventual growth driver as it will continue to provide opportunities since Raven focuses on data collection and tools to execute agricultural decisions in the field.

In Applied Technology, Raven's new harvesting and planting products and international expansion will be growth catalysts. Raven has strengthened its presence in Brazil and generated substantial growth in its OEM business and strengthened long-term relationships with key industry leaders.

The Aerostar segment will continue to focus on expanding its proprietary technology opportunities, including advanced radar systems, high altitude balloons and aerostats into international markets in fiscal 2015. These three market segments present strong growth potential, according to Rykhus.  

Raven stands to benefit from the success of Project Loon, which it began in collaboration with Google Inc. GOOG, to provide high-speed wireless Internet accessibility in rural, remote areas of the world by utilizing high-tech balloons. Even though Raven anticipates modest revenues from the project in the first half of fiscal 2015, the project has great potential to deliver substantial growth going forward.

Raven's chosen markets for growth - agriculture, situational awareness and natural resource protection - will continue to provide profitable opportunities. The company is expected to deliver improved profit in fiscal 2015 on the back of renewed growth in Applied Technology, realization of Aerostar's growth drivers and stronger operational performance in Engineered Films.

Raven currently carries a Zacks Rank #3 (Hold). However, some better-ranked diversified-operations stocks include Federal Signal Corp. FSS and Noble Group Ltd. (NOBGY), both of which sport a Zacks Rank #1 (Strong Buy).