Trading Raven Industries Pre-Earnings

May.20.13 | About: Raven Industries, (RAVN)

The industrial manufacturing conglomerate Raven Industries (NASDAQ:RAVN) will announce its first quarter fiscal 2014 financial results on the morning of Monday, May 20. Raven Industries president and chief executive officer Dan Rykhus will lead a conference call for investors to provide greater insights into operational highlights for the quarter that just ended on April 30 and discuss the company's financial performance during that period. Shares of RAVN closed at $34.43 per share during the May 17 trading session before the announcement of Raven Industries, Inc.'s first quarter fiscal 2014 earnings report, which corresponds to a remarkable 31 percent rise for the company's stock price so far in 2013. By contrast, the market's benchmark S&P 500 Index has gained a healthy 17.89 percent year-to-date in 2013.

The strong performance by RAVN thus far in 2013 is representative of the unique business model and superb execution by the company's senior management in delivering results that encourage investors to assign a 23.94 price-to-earnings multiple on Raven Industries' stock value, while the average for most industrial companies is closer to a 14 multiple. Currently, shares of RAVN are trading at less than 10 percent below their 52-week high of $37.73 per share that was reached during intra-day trading on July 13, 2012. Since that time, RAVN's stock declined to a low of $23.01 per share at the end of November 2012 before rallying a powerful 50 percent to its current price level. Shares of Raven Industries have experienced strong price action since the company's last earnings announcement on March 12 with an approximately 17 percent gain during that time period. To better illustrate the outstanding potential Raven Industries, Inc. offers its prospective investors, a closer look at this company's business operations, technical chart indicators, and analyst ratings will reveal important information about the likelihood of its stock continuing its promising ascent to new highs for the remainder of 2013.

Raven Industries, Inc. operates as three very different independent business units that allow the company to diversify its mix of products for the various markets in which it is involved. Specifically, the three main business segments of Raven Industries are: the Engineered Films Division, the Aerostar Division, and the Applied Technology Division. The company, which began operations in 1956 as a contractor to the U.S. government's burgeoning space program, is based in Sioux Falls, South Dakota. In over 55 years of doing business, Raven Industries has pioneered such interesting examples of products as diverse as the modern hot air balloon and Gore-Tex clothing for sports enthusiasts and the military. By drilling down into each business component, investors quickly realize that Raven Industries is not an average U.S. company by any discernible standard. For example, its engineered films division makes plastic sheeting and films at its massive state-of-the-art 300,000 square foot plant. Raven manufactures such unique products as engineered geomembrane covers and liners that are used as containers for lagoons, landfills, mines, and ponds. This division produces industrial sheeting and films for packaging, tubing, and barriers for a variety of different industries. The engineered films division additionally makes durable protective film and sheeting for companies in the construction, mining, and energy industries.

Raven's Aerostar unit manufactures surveillance and reconnaissance balloons for the U.S. government, as well as parachutes for personnel, cargo, and maneuverable canopy parachutes for airborne soldiers. The Aerostar unit also produces Gore-Tex outerwear for different branches of the U.S. armed forces and high-tech navigation equipment for the maritime industry. In early January 2012, Raven Industries purchased Vista Research, which is a company that designs and manufactures advanced radar and sensor systems for the U.S. military and border patrol. Adding Vista Research to Aerostar's business portfolio allows Raven Industries to integrate the company's technology into its existing product mix with excellent potential synergies for the two high-tech manufacturers and their existing government contracts. Raven's chief executive officer Dan Rykhus said when the deal was announced that the Vista Research acquisition would be accretive to earnings within a one year timeframe, which translates into high expectations for the company's first quarter fiscal 2014 financial results.

Raven's third business segment is its applied technology division that provides field computers, global positioning systems, and wireless communications technology to the agricultural industry. The applied technology division promotes what Raven calls "precision agriculture" through its products that enable farmers to manage seasonal operations information, remotely steer vehicles via GPS programs, compile data, and transmit vital field statistics to more efficiently grow and harvest their crops. The division brings high-technology to the timeless practice of agriculture by allowing farmers the ability to manage their crops in less labor intensive ways and harness the power of wireless communications to create much greater efficiency. Notably, Applied Technology was the fastest growing business division of Raven Industries with an 18 percent increase in revenue and 20 percent rise in operating income year-over-year, according to the company's most recent financial results released on March 12.

A careful analysis of the RAVN chart reveals that the stock is currently trading within pennies of its 8-day exponential moving average at the $34.47 per share price level. Significantly, the stock rose above its 200-day EMA on March 13, which was the day after its Q4 fiscal 2013 earnings report, and has continued its ascent in a strong rally that has seen RAVN shares gain 17 percent in only two months. Currently, the stock's 200-day EMA is at the $30.90 per share price level, which places shares securely above that key indicator as they look poised to resume their upward price trend.

Zacks is the only analyst that presently provides updated coverage for Raven Industries, Inc. and the firm currently has a neutral rating on RAVN after it upgraded the company from a previous underperform rating on Friday, May 17. Shares of RAVN currently have a $37 per share price target by Zacks, which is approximately 7.5 percent above its market price. Zacks expects Raven Industries to report first quarter fiscal 2014 earnings of 44 cents per share when it announces its financial results on May 20. For investors looking to take a position in a growth company in the industrial manufacturing sector with diverse business operations, Raven Industries is a stock to watch when it reports its Q1 fiscal 2014 earnings on Monday.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.