Raven (RAVN) Boosts Slingshot Platform With AgSync Buyout

Raven Industries, Inc. (NASDAQ:RAVN) recently announced that it has successfully acquired majority assets of Wakarusa, IN-based AgSync, Inc. (AgSync). This acquisition is expected to strengthen the company’s premium Slingshot platform, moving ahead. Financial details of the transaction remain undisclosed.

Inside the Headlines

Founded in 2008, AgSync is primarily engaged in providing agricultural logistics software for helping customers deal with issues arising from limited personnel management of large fleets, disconnected software systems and multiple locations. AgSync’s solutions are primarily used by aerial applicators, seed companies, ag retailers, and forestry and enterprise customers. AgSync generated revenues of approximately $3 million over the trailing 12 months.

Raven expects that the AgSync buyout will fortify its commercial footprint in the global precision agriculture industry. By improving its Slingshot platform, the acquisition will help the company deliver seamless logistic solutions (for its enterprise farms, custom applicators and agricultural retailers) in the market.

Per the terms of the aforementioned deal, assets of AgSync will be integrated within Raven’s Applied Technology division. This segment of Raven primarily engages in making and providing innovative precision agriculture products and information management tools. These products help growers reduce costs and improve farm yields. In addition to these, the company also provides related services for the products offered. The Applied Technology segment accounted for roughly 28.3% of Raven’s total revenues in third-quarter fiscal 2019 (ended Oct 31, 2018).

Raven’s Inorganic Stance

Of late, Raven has been steadily becoming more competent on the back of strategic inorganic moves. In sync with this, the company is acquiring several high margin-generating businesses and at the same time, divesting certain non-core trading arms. Prior to the AgSync buyout deal, Raven acquired Colorado Lining International, Inc. (September 2017), in a bid to reinforce its business footprint in the global geomembrane market. On the other hand, the company (February 2018) disposed off 22% of its stake in Site-Specific Technology Development Group, Inc, and divested the aerospace client private business in the first quarter of fiscal 2019 (ended July 2018).

We expect that the successful inclusion of AgSync will further fortify Raven’s inorganic growth trajectory and improve its access to new customers, regions and product lines, moving ahead.

Our Take

Raven is poised to grow on the back of elevated sales of its strategic inorganic moves, innovative products, market-share gains, Latin-American investments, the new U.S. Naval five-year contract (October 2018) and solid customer relationships. Over the past year, this Zacks Rank #3 (Hold) stock has rallied 5.4%, as against the 23.5% loss recorded by the industry it belongs to.

However, material cost inflation (on account of tariffs levied over U.S. imports), project Atlas expenses and new enterprise resource planning implementation costs might hurt Raven's near-term margins. Also, anticipated weakness in the hurricane recovery film's sales and unfavorable conditions in the agricultural market remain other causes of concern for the company.

Stocks to Consider

Some better-ranked stocks in the same space are listed below:

Carlisle Companies Incorporated (NYSE:CSL) carries a Zacks Rank #2 (Buy). The company pulled off a positive average earnings surprise of 11.90% in the past four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Federal Signal Corporation (NYSE:FSS) also holds a Zacks Rank of 2. The company generated a positive average earnings surprise of 21.18% in the trailing four quarters.

ITT Inc. (NYSE:ITT) carries a Zacks Rank of 2, currently. The company delivered a positive average earnings surprise of 5.72% in the last four quarters.

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