GGG Graco Inc

Raven Industries Inc. (RAVN) delivered earnings of 68 cents per share in its fiscal second quarter 2012 ended July 31, 2011, comfortably exceeding the Zacks Consensus Estimate of 51 cents. Results surged 48% from 46 cents earned in the year-ago quarter. Net income improved 49% from the year ago quarter to $12.5 million in the second quarter of 2012.

The improvement was primarily driven by the outperformance at Applied Technology supported by solid results at Aerostar.

Operational Update

Sales increased 23% y/y to $90.3 million, striding ahead of the Zacks Estimate of $85 million. The outperformance was driven by double-digit sales growth at Applied Technology, Engineered Films and Aerostar. However, a decline at Electronic Systems was a partial offset.

Cost of sales increased 18% year over year to $62.2 million in the quarter under review. Selling, general and administrative expenses increased 22% year over year to $7.1 million.

Operating income surged 48% year over year to $18.7 million in the quarter, driven by significant improvement in profits at Applied Technology supported by strong results at Aerostar.

Segmental Performance

Applied Technology: The segment delivered record sales and profit in the quarter under review.

Sales surged 54% year over year to $32.3 million in the quarter. Operating income was $12.1 million, a whopping increase of 120% year over year.

The outperformance was driven by continued demand for the company's precision agriculture solutions. International sales also remained strong during the quarter.

Engineered Films: The segment posted the all-time high quarterly sales delivering a 24% year-over-year increase to gross $32.5 million in the reported quarter.

Energy market sales improved on the heels of higher level of drilling and exploration activity.

However, operating income declined 5% year over year to $5.3 million. Higher resin costs weighed on the results.

Aerostar: Sales increased 18% year over year to $10.9 million in the quarter. Operating income of the segment increased by a substantial 62% over the prior year period to $9.2 million. 

During the quarter, sales of parachutes led the top-line improvement.

Electronic Systems: The segment reported a 9% year over year decline in sales grossing $16.5 million in the quarter. Operating income also decreased 18% year over year to $2.3 million.

Financial Position

Raven Industries ended the quarter with cash and cash equivalents including short-term investments of $47 million, lower than $53.6 million in second quarter 2011.

Cash provided by operating activities during the first half of 2012 improved to $26.3 million from $19.8 million in the year ago period.

Peer Comparison

Graco Inc. (GGG), which competes with Raven Industries, posted a net income of $38.1 million or 61 cents per share in the second quarter of  2011 compared with a net income of $24.8 million or 41 cents per share in the year-earlier quarter. The results missed the Zacks Consensus Estimate of 67 cents. 

The quantitative Zacks #3 Rank (short term Neutral rating) for Raven Industries indicates no clear directional pressure on the stock over the near term.

 
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