Raven Industries Inc. (RAVN) announced that Vista Research, a subsidiary of its Raven Aerostar segment, has been awarded an $8.4 million operations and maintenance contract by the U.S. Army. Raven’s shares gained 1.27% from the news to close at $34.42.
The firm-fixed-price, cost-plus-fixed-fee contract is for the upgrade and replacement of currently fielded radar systems in support of the U.S. Army's Persistent Ground Surveillance Systems (:PGSS) Program. The project is expected to be completed by the end of this year.
Vista’s association with the PGSS program dates back to 2011, since when Vista has been providing it with radar systems and support. The Vista Smart Sensor Radar Systems (:SSRS) are designed and optimized for tracking targets amid difficult radar clutter conditions. SSRS products help detect and track land, maritime and air targets of interest from platforms such as aerostats, towers, unmanned aerial vehicles and mobile vehicles with accuracy and reliability. The Vista product portfolio includes radar systems with various specifications viz., SSRS-F25, SSRS-F50 and SSRS-F50-ER.
Raven Aerostar is a world leader in the design and manufacture of aerospace, surveillance technology, electronics and specialty sewn products. Vista Research came under Raven’s umbrella when Aerostar acquired Vista Research in 2012. This acquisition immediately enabled Raven Aerostar to enhance its tethered aerostat security solutions.
The Aerostar segment had a weak first quarter which dragged down Raven’s overall results. Aerostar sales decreased 19% year over year to $17.7 million, affected by timing issues and planned declines in contract manufacturing. The segment reported break-even results compared with the operating income of $1.8 million in the prior-year quarter.
Decline in revenues in the Applied Technology and Aerostar segments offset the improved revenues in the Engineered Films segment, leading to a 1% decline in Raven’s overall sales to $102.5 million. Raven reported a 21% year-over-year decline in its first-quarter fiscal 2014 (ended Apr 301, 2014) earnings to 30 cents per share. Continued softness in the North American agriculture market and order delays in new contracts in the Aerostar segment led to the year-over-year decline.
However, within Aerostar, Vista Research reported strong sales in the quarter. Vista's Smart Sensing Radar Systems delivered a 29% quarterly revenue increase. Vista Research has been selected by Raytheon Co. (RTN) as a preferred radar solution for future domestic or export opportunities. Additionally, Vista's systems are being utilized by the U.S. Navy and are included in the initial budget submitted to the Congress this year.
Overall in fiscal 2015, management anticipates Engineered Films to continue its momentum while continued agricultural uncertainty in North America will affect Applied Technology’s performance. Aerostar is expected to deliver mixed results. Aerostat contracts will materialize in the second and third quarters, and balloon shipments to Google Inc. (GOOG) under Project Loom will ramp up to planned levels later this year.
South Dakota-based Raven is an industrial manufacturer offering a variety of products for agricultural, industrial, construction and aerospace markets. The company operates through three business segments, namely, Engineered Films; Electronic Systems; and Applied Technology and Aerostar.
Raven currently carries a Zacks Rank #4 (Sell). A better-ranked diversified-operations stock worth considering is CLARCOR Inc. (CLC), with a Zacks Rank #1 (Strong Buy).
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