Shares in Raven Industries are tanking almost 8% in the pre-market session, after its board of directors indefinitely suspended the company’s regular quarterly cash dividend on its common stock.
The stock is declining to $22.42 in Thursday’s pre-market trading. Raven (RAVN) said that the withdrawal will help the company save nearly $20 million in capital on an annual basis. The specialty industrial machinery company said it will use the funds to make investments in Raven Autonomy and Raven Composites. It will also provide the company with more flexibility to fund M&A and accelerated R&D investments.
“The opportunity for significant long-term growth from these investments is substantial, and the company believes this to be the most appropriate use of capital to drive long-term growth in shareholder value,” the company said in a statement.
Back in May, Raven’s board approved a regular quarterly cash dividend of 13 cents per share, which was payable July 31, to shareholders of record on July 17.
“We are fully committed to boldly investing in the future of our company,” said Raven CEO Dan Rykhus. “This decision speaks greatly to the tremendous opportunities in front of us and is being taken from a position of strength, with utmost confidence in our future.”
The news comes as Raven reported that consolidated sales in the second quarter ended July 31, dropped 13.1% to $85.2 million from the year-ago period, beating the Street consensus by $0.47 million. Net income for the quarter fell to $5.8 million from $8.8 million.
Diluted earnings per share was $0.16 versus $0.24 per share, a year ago exceeding analysts’ estimates by $0.12. Raven added that its investment in Raven Autonomy reduced net income attributable to the company by $3.1 million, or $0.09 per diluted share, in the reported quarter. (See RAVN stock analysis on TipRanks)
Following the news, Oppenheimer analyst Kristen Owen assigned a Buy rating on the stock with a price target of $27 (11% upside potential).
“Results demonstrated RAVN’s technology differentiation, as strength in new ATD [applied technologies] products and AERO [Aerostar] backlog conversion helped to offset COVID-related disruptions and significant declines in energy and construction films sales,” Owen wrote in a note to investors. “With its strongly signaled commitment to investing for growth, we will be looking for additional details on its technology integration, product roadmap, and commercialization milestones.”
The rest of the Street is cautiously optimistic on the stock with a Moderate Buy analyst consensus. With shares down more than 29% so far this year, the $27 average price target, indicates 11% upside potential to current levels.
Related News:
Splunk Slips In Pre-Market As Revenue Outlook Disappoints; Street Stays Bullish
NetApp Leaps 11% In After-Hours On Strong 1Q Results
Nordstrom Drops 5% On Larger Quarterly Loss As Analyst Says Stock Valued
