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Raven (RAVN) Focused on Growth Despite Market Weakness

On Apr 12, 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 Industries’ fourth-quarter fiscal 2016 earnings per share plunged 81% to 3 cents per share from 16 cents per share earned in the year-ago quarter. Sales also dropped 41% year over year to $52.8 million in the quarter as all the three divisions continued to face reduced end-market demand.

Fiscal 2017 will come as no respite as Raven’s core businesses will remain challenged by market headwinds. 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 a weak energy market, Raven remains focused on driving growth in other markets by capitalizing on its new production and acquired fabrication capabilities. The company expects these efforts to lead to market share gains and also drive margin expansion as volumes pick up.

The pipeline of new businesses remains strong in the Applied Technology segment. There are quite a few opportunities for growth and market share expansion. OEM interest in its new product portfolio is robust and the international markets, particularly Europe and Latin America, hold promise. Further, the company has formed a new leadership in Aerostar with focus on turning around Vista Research and advancing Project Loon. Raven expects to maintain flat sales and adjusted operating income in fiscal 2017.

Yet, the company continues to invest in growth. Raven recently made a minority investment in AgEagle, a leader in UAS technology for agriculture, providing aerial data acquisition capabilities to agriculture service providers and growers. Along with this investment, Raven entered into an exclusive distribution agreement with AgEagle to provide unmanned aerial systems to its customers.

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

Stocks that Warrant a Look

Some better-ranked stocks in the same space are 3M Company MMM, Carlisle Companies Incorporated CSL and CLARCOR Inc. CLC. All three stocks carry a Zacks Rank #2 (Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
3M CO (MMM): Free Stock Analysis Report
 
RAVEN INDS INC (RAVN): Free Stock Analysis Report
 
CLARCOR INC (CLC): Free Stock Analysis Report
 
CARLISLE COS IN (CSL): Free Stock Analysis Report
 
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