SEH Spartech Corp.

Raven Industries Inc. (RAVN) reported fourth quarter results ended January 21, 2012, delivering earnings of 60 cents per share, increasing 46% from the 41 cents earned in the year-ago quarter. Earnings per share comfortably surpassed the Zacks Consensus Estimate of 48 cents per share.

Operational Update

Sales increased 36% year over year to $96.3 million, beating the Zacks Consensus Estimate of $78 million. The outperformance was attributable to the double-digit sales across all the segments.

Cost of sales increased 32% year over year to $68 million in the reported quarter. Selling, general and administrative expenses increased 27% year over year to $8.7 million. Operating income soared 62% year over year to $16.6 million in the quarter.

Fiscal 2012 Performance

In fiscal 2012, the company reported earnings of $2.77 per share, which increased 24% from the prior year earnings of $2.24 per share. Sales in the full year 2012, saw a rise of 21% to $381.5 million from the year ago quarter of $314.7 million.

Segmental Performance

Applied Technology: Sales surged 29% year over year to a record $28.8 million in the reported quarter in this segment. Operating income also soared 28% to $7.5 million from $5.9 million. The performance was attributable to the continued demand for the company's precision in agriculture solutions. International sales also saw a strong growth during the quarter.

Engineered Films: The segment also saw record sales of $36.0 million, increasing 48% year over year from $24.3 million. Consequently, operating income also saw a whopping 114% increase year-over-year to $6.5 million. The solid performance was supported by demand growth, strong energy market and introduction of new products.

Aerostar: Sales increased 32% year over year to $15.8 million in the quarter. Operating income of the segment surged 49% over the prior year period to $3.4 million. During the quarter, consistent sales of parachutes and shipment of aerostat systems led the improvement of this segment. Increased parachute production capacity also added to the contribution.

Electronic Systems: Sales jumped 34% year over year to $18.4 million in the quarter. Operating income nearly doubled year over year to $3.3 million. Sales of secure communication products and industrial controls contributed to the growth in sales of this segment.

Financial Position

Raven Industries ended the year with cash and cash equivalents, including short-term investments of $25.8 million, lower than $39 million at the end of January 31, 2011. Cash provided by operating activities during twelve months of 2012 improved to $43.8 million from $42.1 million in the year ago period.

Our Take

All the four segments of Raven Industries experienced strong sales in the quarter. Strong demand across all the segments as well as introduction of new products in the line of Engineered Films added to the momentum. The company continues with its strategy of investing significantly in the research and development, thereby, helping to maintain the strong financial results.  

In addition, Raven has ample scope to fund future growth and increase dividends with the support from debt-free balance sheet and solid cash flow. Thus, we have a Zacks #2 Rank, implying a short-term “Buy” recommendation for the stock.

South Dakota-based Raven Industries Inc. is an industrial manufacturer providing a variety of products for the agricultural, industrial, construction and military/aerospace markets. The company operates through four business segments: Engineered Films, Electronic Systems, Applied Technology and Aerostar. Graco Inc. (GGG) and Spartech Corp. (SEH) are the peers of Raven.

 
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