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Raven Industries' (RAVN) Q1 Earnings & Revenues Decline Y/Y

Zacks Equity Research

Raven Industries, Inc. RAVN reported disappointing first-quarter fiscal 2020 results (ended Apr 30, 2019), with earnings and revenues declining year over year.

The company’s earnings per share in the quarter were 36 cents, down 28% year over year. The downside was primarily caused by lower hurricane recovery film sales.

Inside the Headlines

Net sales in the quarter declined 11.6% year over year to $98.2 million. Notably, excluding sales from hurricane recovery films, the company’s revenues in the quarter fell 4% on a year-over-year basis.

Raven Industries, Inc. Price, Consensus and EPS Surprise

Raven Industries, Inc. Price, Consensus and EPS Surprise

Raven Industries, Inc. price-consensus-eps-surprise-chart | Raven Industries, Inc. Quote

 

The company reports net sales under three segments — Applied Technology, Engineered Films and Aerostar. The segmental information is briefly discussed below.

Revenues in the Applied Technology segment were $41.7 million, up 3.2% year over year. The improvement was led by higher international sales.

Notably, the segment’s sales improved 11.3% year over year for international operations, while sales for domestic operations were flat year over year.

Revenues in the Engineered Films segment totaled $44.3 million, down 26.2% from the year-ago quarter’s figure. The year-over-year decline was caused by volumes due to significant decline in hurricane recovery film sales.

Revenues in the Aerostar segment increased 11.8% year over year to $12.2 million due to higher stratospheric balloon and radar sales.

Margins, Costs & Expenses

In the reported quarter, Raven’s cost of sales fell 11.3% year over year to $63.1 million. The figure contributed 64.3% to sales compared with 64% in the year-ago quarter. Gross margin declined 30 basis points (bps) year over year to 35.7%.

Research and development expenses in the quarter grew 37.7% year over year to $7.3 million. It contributed 7.4% to the quarter’s net sales compared with 4.8% in the year-ago quarter. Selling, general and administrative expenses were down 3.8% year over year to $12.7 million. As a percentage of sales, it represented 12.9% compared with 11.8% in the year-ago quarter.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $18.9 million, down 38.7% year over year. EBITDA margin in the reported quarter was 19.3% compared with 27.8% in the year-ago quarter.

Operating income in the quarter plunged 29.8% year over year to $15.1 million primarily due to fall in sales volume as well as higher research and development expenses. Operating margin was 15.4%.

Balance Sheet and Cash Flow

Raven exited the quarter with cash and cash equivalents of $61.4 million, down 6.7% from $65.8 million at the end of the last reported quarter (ended Jan 31, 2019).

In the first quarter of fiscal 2020, the company generated net cash of about $8.8 million from operating activities, down 35.3% year over year. Capital expenditure amounted to $1.6 million, down 61.9% from the year-ago quarter’s figure. During the period, the company paid dividends worth $4.7 million.

Outlook

The company’s Applied Technology segment is actively working in establishing strong foothold in the international region and introduction of new technologies. In addition, the Engineered Films segment is likely to gain from strength in the energy market.

Key Picks

Some stocks in the same space are Carlisle Companies Inc. CSL, HC2 Holdings, Inc HCHC and Federal Signal Corp. FSS. While Carlisle and HC2 Holdings sport a Zacks Rank #1 (Strong Buy), Federal Signal carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Carlisle surpassed estimates thrice in the trailing four quarters, the average being 19.07%.

HC2 Holdings’ earnings surprise in the last reported quarter was 92.73%.

Federal Signal exceeded estimates in each of the trailing four quarters, the average being 21.75%.

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