Bear of the Day: Vista Outdoor (VSTO) – September 12, 2019


Vista Outdoor Inc. (VSTO Free Report) develops and manufactures ammunition, long guns, and related outdoor equipment products. Their main customer base includes sport-shooting enthusiasts, hunters, and federal and local law enforcement agencies.

Last month, Vista reported a worse-than-expected fiscal 2020 first quarter. A loss of $0.08 on revenue of $459.77 million both missed the Zacks Consensus Estimate; revenue fell 13% year-over-year, while gross profit was down 16% from the prior-year-period.

Vista recently divested its firearm business, and with a turnaround now in place, the company needed to reset its full-year outlook. Fiscal 2020 earnings are now expected between $0.10 to $0.25 per share, down from $0.28 and $0.38 per share; Vista also cut its revenue guidance to $1.79 billion to $1.89 billion from $1.94 billion to $2.03 billion.

Analysts have since turned bearish on Vista, with three cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to decline about 7% for the year, and the Zacks Consensus Estimate has dropped 13 cents during that same time period from $0.26 to $0.13 per share. This sentiment has stretched into 2021. While earnings could see positive growth, our consensus estimate has dropped 12 cents in the past two months.

VSTO is now a Zacks Rank #5 (Strong Sell).

Shares of the outdoor equipment maker have slumped 42% since January compared to the S&P 500’s gain of about 19.5%.

Bottom Line

Despite being able to slash its debt by $150 million as a result of the sale, Vista’s firearm divestiture turnaround plan will prove tough for the company, especially now that Walmart (WMT Free Report) is banning the sale of all handgun ammunition and certain long-gun rounds.

Investors who are interested in adding a leisure and recreation peer to their portfolio should take a look at Zacks Rank #2 (Buy) ranked Callaway Golf (ELY Free Report) , up about 26% year-to-date.

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2019-09-12 10:18:00

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