Ammo Maker Vista Outdoor Earnings Misfire Again

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Vista Outdoor Inc. (NYSE: VSTO) reported fourth-quarter and fiscal year 2017 results before markets opened Thursday. The ammunition and outdoor products company posted adjusted diluted earnings per share (EPS) of $0.03 on revenues of $578.75 million. In the same quarter a year ago, Vista reported EPS of $0.63 per share on revenues of $612.3 million. The consensus estimates for the quarter called for EPS of $0.17 and $564.56 million in revenue.

Shares reached a high of around $52 last August before dipping to around $38 on election day. Since then the shares have tumbled by nearly 50% based on reduced fears of additional regulation on the industry. As we noted in February when Vista reported third-quarter earnings, “If the gun control fears are gone, the impetus to buy up endless amounts of guns and ammunition has gone away for the time being.”

For the fiscal year, sales totaled $2.55 billion, down 12% year over year, and gross profit rose 8% to $669 million. Adjusted EPS totaled $1.90, down from $2.50 in fiscal year 2016. Analysts were looking for EPS of $2.02 and sales of $2.53 billion.

CEO Mark DeYoung said:

We are experiencing unprecedented decline in demand for ammunition and firearms following the presidential election and softness in the retail environment. These impacts have manifested themselves in our results. In order to address ongoing market headwinds, we are taking actions on several fronts. We are expanding our brands’ e-commerce presence to capitalize on the shift by consumers to online shopping. We are right-sizing our workforce, streamlining the organization and reducing inventory. We are driving cost-savings initiatives and improved efficiencies within our manufacturing, sourcing and distribution capabilities. We have also negotiated a long-term agreement with Orbital ATK for the supply of ammunition products produced at the Lake City Army Ammunition Plant through September 2020.

Vista also took a noncash write-down on a goodwill impairment of $449 million, of which $354 million is nondeductible for tax purposes. Free cash flow dropped from $162.96 million in fiscal year 2016 to $37.72 million in fiscal year 2017.

In its outlook statement for fiscal year 2018, Vista said it expects sales between $2.36 billion and $2.42 billion and EPS in a range of $1.10 to $1.30. Analysts had estimated 2018 EPS of $1.75 and revenues of $2.43 billion.

The stock traded down about 14% in Thursday’s premarket to $17.75, below the 52-week range of $18.32 to $52.08. The consensus 12-month price target is $22.81.