On March 20, Zacks Investment Research downgraded Raven Industries Inc. (RAVN), manufacturer of industrial goods, to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Raven has witnessed sharp downward estimate revisions after reporting disappointing fourth-quarter fiscal 2014 results on March 12. The stock also fell around 11% in the trading session after the earnings release.
In the quarter, Raven’s earnings declined 23% year over year to 23 cents per share. The reported figure fell short of the Zacks Consensus Estimate of 32 cents. Increased raw material costs in the Engineered Films segment, increased investments in research and development (R&D) for Aerostar and lower sales volume in Applied Technology led to the year-over-year decline.
Sales increased 3% year over year to $92.6 million in the quarter but missed the Zacks Consensus Estimate.
For the full year 2014, earnings per share fell 19% year over year to $1.17, lagging the Zacks Consensus Estimate of $1.26. Revenues fell 3% to $395 million from $406 million in the previous fiscal, missing the Zacks Consensus Estimate.
For first-quarter fiscal 2015, Raven expects solid sales growth in Engineered Films from agriculture, along with higher OEM deliveries in Applied Technology. However, contract manufacturing declines and the uncertain agricultural aftermarket will pose challenges.
In the first quarter, Raven expects profits to be flat to slightly down. Thereafter, the company is expected to deliver increased profits in the balance of the year. Nevertheless, delay in contracts, pricing pressure, general market softness and volatile raw-material costs will hurt Raven’s earnings.
Following the fourth-quarter earnings announcement, the Zacks Consensus Estimate for Raven declined 14% to $1.21 per share for 2015 and 15.9% to $1.32 per share for 2016.
Other Stocks to Consider
Some better-ranked stocks in the same industry include Federal Signal Corp. (FSS), Noble Group Limited (NOBGY) and Sumitomo Corporation (SSUMY). All these of these carry a Zacks Rank #1 (Strong Buy).