Stock Analysis & Ideas

Why Is Raven Industries (RAVN) Stock Up 49% Today?

The price of Raven Industries (NASDAQ: RAVN) shares surged 49.3% on June 21. Raven is a provider of precision agriculture technology, engineered films, and aerospace components.

On Monday, Raven Industries agreed to be acquired by CNH Industrial (CNHI) at $58 per share. Given that CNH is ready to pay such a huge premium to get the deal done, Raven shares reacted accordingly, sending the price to this new high.

In fact, lately the investors in Raven Industries have been having a great time. The company, with a market capitalization of $2.1 billion, witnessed its stock move higher by 35% over the last 5 days and 33.5% in the past month. In addition, over the past year, Raven shares have gained 172.6%.

More on the Recent Deal

The buyout is an all-cash transaction valued at approximately $2.1 billion. The purchase price represents a premium of 33.6% to the stock’s 4-week volume-weighted average price.

The deal, which awaits certain approvals and customary closing conditions, is expected to be completed in the fourth quarter of 2021.

The combined company is expected to become a better player in the global agriculture equipment market, with enhanced capabilities in agriculture technology.

Raven Industries CEO Dan Rykhus said, “Our Board and Management are excited about this partnership and what it means for our future.”

Rykhus added “By coming together with CNH Industrial, we believe we will further accelerate that path as well as bring tremendous opportunities and value to our customers — once again fulfilling our purpose to solve great challenges.” (See Raven stock chart on TipRanks)

Analysts’ View about the Deal Impact on other Stocks

Post the recent merger announcement with CNH Industrial, Robert W. Baird analyst Mircea Dobre reiterated Outperform ratings on both Titan and Deere shares. Titan machinery, which owns and operates owns and operates a network of agriculture and construction equipment stores across the U.S. and Europe, is Raven’s largest dealer.

Dobre expects the deal to be positive for Titan Machinery (TITN) in the long term and calls it “uniquely positioned to benefit as a boots-on-the-ground provider of service and aftermarket support.”

Furthermore, the analyst believes that the “expensive pre-synergies” deal price implies the growing importance of developing and integrating precision autonomous agricultural technologies in the agriculture equipment market. Raven’s equipment helps farmers raise their efficiency through technology. As the analyst sees Deere as “the industry leader” in the agricultural technology space, he believes Deere (DE) is also well-positioned to benefit from the deal going forward.

Additionally, Oppenheimer’s analyst Kristen Owen commented, “For RAVN, the transaction represents the opportunity to rapidly scale its Autonomy solutions and extend its technology across the crop cycle.”

Earnings Details

On May 18, Raven reported impressive fiscal first quarter 2022 numbers. The company posted Q1 adjusted earnings of $0.26 per share, up 136% from the year-ago quarter and also outpaced the Street estimates of $0.14.

Revenues jumped 30% year-over-year to $112.5 million and surpassed analysts’ expectations of $94.4 million. The year-over-year growth was driven by strong sales in Applied Technology and Engineered Films division.

Analysts’ Opinions Post Earnings Announcement

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 2 Buys. The average RAVN analyst price target of $51 implies 11.5% downside potential from the current levels.

Oppenheimer analyst Kristen Owen maintained a Buy rating on the stock and increased the price target to $47.00 from $41.00. This implies 18.5% downside potential to current levels.

Owen commented, “While not immune from supply chain constraints, RAVN demonstrated solid execution with pricing and volume leverage more than offsetting incremental investment spend and higher freight/raw materials costs.”

She further added, “Given a return to growth in its end markets, we believe RAVN is well positioned to capitalize on its strategic growth plan initially outlined pre-pandemic and see the achievement of key commercialization milestones this year as an important validation for investors.”

Also, Lake Street analyst Ben Klieve maintained a Buy rating on the stock and increased the price target to $55.00 from $50.00. This implies 4.6% downside potential to current levels. The analyst remains positive about Raven’s legacy product line and believes that the company’s autonomous agriculture machinery initiative is “uniquely well positioned and undervalued.”

TipRanks Vital Metrics

Raven scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

TipRanks data shows that financial blogger opinions are 100% Bullish on RAVN, compared to a sector average of 71%.

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Disclosure: Shalu Saraf held no position in any of the stocks mentioned in this article at the time of publication.

Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.

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