Where Do Businesses Go When They Need Something?
To answer the question of where do businesses go when they need something we say a business services company. Because we are expecting a vigorous economic reopening this spring we also expect to see the business services companies do well too. Estimates for GDP growth in 2021 continue to rise and now stand above 10% for the year which is quite a feat not to mention an opportunity for businesses servicing other businesses for their income.
Raven Industries Is Ready To Rebound
Shares of Raven Industries (NASDAQ:RAVN) fell more than 10% after releasing its Q4 results and presenting a possible entry point for new money. The company is a micro-cap with a multi-pronged approach to business services. The company operates in three segments that include Applied Technology, Engineered Films, and Aerostar giving it exposure to three very different segments of the market. The Applied Technology segment combines traditional farming techniques with advanced engineering and software to enhance farm production of all kinds; the Engineered Films segment manufactures specialty plastic films and sheeting for agriculture, industry, and construction; and Aerostar manufactures equipment and software for high-altitude use by governments and industries.
The company’s Q4 results were weaker than expected but mitigated, in our view, by three facts. The first is that Applied Technology revenue grew 6% YOY and is expected to continue growing. The second is that Aerostar revenue was impacted by the timing of government contracts, this revenue will be recouped. The third is that weakness in end-markets for the Engineered Films segments will dissipate with the reopening, it’s just a matter of time. Based on the company’s outlook and growing orders in both the Applied Technology and Engineered Films segments we expect to see revenue return to YOY growth as soon as the fiscal 1st quarter and accelerate into the end of the year. CEO Dan Rykhus said:
"Fiscal 2022 will be an exciting year for our company as we build out each of our strategic platforms for growth while leveraging the strength of our underlying businesses. Substantial order activity and improving market fundamentals provide confidence in our ability to drive strong year-over-year growth in Applied Technology and Engineered Films. As we execute on these opportunities, we will remain focused on aggressively investing to advance Raven Autonomy™, Raven Composites™ and Raven Thunderhead while making significant progress on our multi-year plan to drive a step-change in our long-term growth."
Shares of Synnex (NYSE:SNX) began moving shortly after it released earnings for two reasons. The first is the company soundly beat its estimates for both revenue and earnings and gave guidance that was, while weak, viewed as cautious and easy to beat. The second is a merger deal. Synnex, a global distributor of technology for business and industry, will merge with Tech Data (NASDAQ:TECD_old), a company wholly-owned by Apollo Capital Management. The combined company will double Synnex’s annual revenues and deliver a minimum of $200 million in synergies within two years of closing. Shareholders of Synnex will own 55% of the combined company.
Shares of SNX are in a clear uptrend and one that seems to be gaining momentum. The merger announcement helped the shares gap up to a new all-time high in concert with a strong technical buy-signal. The signal begins with price action, is backed up by strong and rising momentum, and ends with the bullish crossover in stochastic. In our view, this signal points to a strong upward movement that could add another $10 to $15 to share prices over the next quarter.
