Please ensure Javascript is enabled for purposes of website accessibility

Raven Industries Positions Itself for Another Challenging Year

By Steve Symington – Mar 10, 2016 at 10:40AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The mini-industrial conglomerate continues to see headwinds in each of its core businesses, but there's a silver lining.

Raven's 7-barrier film line operating in the Engineered Films segment. Image source: Raven Industries.

Raven Industries (RAVN) announced fiscal fourth-quarter 2016 results Thursday before the market opened, offering investors yet another tough quarter with the backdrop of sustained economic headwinds. To be fair, Raven management did warn three months ago this quarter would remain challenging, but also insisted Thursday that, thanks to the actions it took over the last year, it stands much better positioned to weather those headwinds and take market share in the process.
Let's take a deeper look at what the mini-industrial conglomerate achieved in Q4:

Raven Industries results: The raw numbers


Fiscal Q4 2016 Actuals

Fiscal Q4 2015 Actuals

Growth (YOY)


$52.8 million

$89.9 million


Net Income

$1 million

$6.2 million


Earnings Per Diluted Share




Data source: Raven Industries.

What happened with Raven Industries this quarter?

  • Revenue excluding sales from contract manufacturing -- a low-growth business Raven began the process of exiting in late 2014 -- declined 36.4% to $51.8 million.
  • Operating income was $0.2 million, down from $6.4 million in last year's fourth quarter, primarily due to lower sales across all divisions.
  • Restructuring and cost controls reduced corporate sales, general, and administrative expenses by $2.2 million from the same year-ago period.
  • At Engineered Films:
    • Revenue fell 37.8% year over year to $25.4 million, driven by lower sales into the energy and geomembrane markets due to the negative influence of commodity oil prices. Sales into the agriculture, construction, and industrial markets climbed 3.9%.
    • Operating income fell 58.8% year over year to $1.9 million, driven by lower sales volumes, and offset partially by raw material cost developments, reformulation efforts, and cost controls.
  • At Applied Technology:
    • Revenue declined 30.3% to $18.4 million. Excluding contract manufacturing, revenue fell 26.1%.
    • Sales to OEM and aftermarket clients fell 33% and 21%, respectively, and international sales climbed 46%.
    • Operating income fell declined 34.7% to $2.2 million, again as cost controls and restructuring couldn't offset the effects of lower volumes.
    • Nonetheless, Raven CEO Dan Rykhus insisted the company is encouraged by Applied Technology's momentum and business pipeline, and is seeing "promising developments" particularly in Europe and Latin America.
  • At Aerostar:
    • Revenue declined 63.3% year over year to $9 million. Excluding contract manufacturing, revenue declined 49.1% to $8 million, driven by lower Vista Research sales.
    • Operating loss was $0.2 million, compared to operating income of $4.3 million in the same period last year.
    • Vista Research sold radar systems to several customers in the same year-ago period, but was unable to sustain those sales this year given order timing and falling government defense spending.
    • Rykhus called Aerostar's performance for the year "very disappointing," but praised the progress of the new leadership team put into place given a lack of execution from previous leadership.
    • Though Aerostar sales cycles are long, the division is building a more robust pipeline and "vigorously pursuing new opportunities."

What management had to say 
Rykhus added:

We believe we have a number of strong opportunities in front of us to drive market share gains in fiscal year 2017. Momentum is building within Applied Technology, new production capabilities are on-line in Engineered Films, and we have new invigorated leadership in Aerostar focusing on turning around Vista Research and advancing Project Loon. We are cautiously optimistic that the sequential year-over-year sales comparisons will continue to improve as we progress through the year.

Looking forward 
In keeping with Raven Industries' past quarters, management declined to offer specific earnings guidance for the coming year. But Rykhus did state the company anticipates roughly flat sales and adjusted operating income for all of fiscal 2017, "with the potential to achieve very modest growth in each."

For perspective, during last quarter's call, Rykhus stated the company believed it would return to sustained revenue and earnings growth in fiscal year 2017, regardless of continued market headwinds. But given the persistence of those headwinds in all three of Raven's core markets, it's hard to blame him for remaining cautious regarding the prospect of that growth materializing. Though Raven Industries' challenges won't abate in the very near future, it could emerge a stronger company in the end if it can seize its opportunity to take market share in the meantime.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Raven Industries. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Raven Industries Stock Quote
Raven Industries

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.