Raven (RAVN) Looks Good On Product Strength, Risks Stay

On Sep 13, 2016, we issued an updated research report on Raven Industries Inc. (NASDAQ:RAVN) . The industrial goods manufacturer will benefit from its focus on technological advancements and product introductions. Robust pipeline in the Aerostar segment also bodes well for the company. However, the weak U.S. agricultural market, suppressed oil and gas sector, foreign currency volatility and increased competition pose threats.

Raven has introduced two new significant products – Hawkeye nozzle control system and next-generation rate control system – through sustained funding of key R&D projects over the last few years. These products have been getting positive customer feedback and generating strong demand as well. This trend is expected to continue in the second half of the fiscal 2017and into fiscal 2018.

Further, fresh product introductions by Raven continued to gain traction, particularly through the original equipment manufacturer (OEM) channel. During second-quarter fiscal 2017, the company added a new international OEM relationship in Latin America and also expanded its relationships with two key strategic OEM partners in the U.S.

Raven’s Aerostar segment continued to grow across many of its platforms, including stratospheric balloons, radar systems, and aerostats. During fiscal second quarter, the division sold an advanced radar system to the U.S. government for overseas deployment and also went ahead with a number of other international pursuits. The pipeline of high-quality business opportunities for the division has improved significantly.

However, with the persistently low U.S. corn prices along with the forecast for decreased agricultural equipment sales volume through the rest of the year, Raven believes that the U.S. agricultural market will remain challenging.

The energy and geomarkets, combined, plummeted more than 40% year over year in fiscal first quarter. Even though these markets have partially recovered, to post a 6% decline in the second quarter, the company does not expect them to rebound for some time now. Further, in engineered films, Raven anticipates the energy and geomembrane markets to stabilize, albeit at a much lower level than the prior year.

In addition, Raven’s financial results could be hurt by changes in trade, monetary and fiscal policies, and laws and regulations. Moreover, foreign exchange volatility and increased competition will hamper growth.

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

Stocks that Warrant a Look

Some better-ranked stocks in the same sector are Bunzl (LON:BNZL) plc (OTC:BZLFY) , CLARCOR Inc. (NYSE:CLC) and Crane Co. (NYSE:CR) . While Bunzl sports a Zacks Rank #1 (Strong Buy), CLARCOR and Crane carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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