Understanding Vista Outdoor’s Top and Bottom Lines in 4Q16

Price movement of Vista Outdoor

Vista Outdoor (VSTO) has a market cap of $3 billion and rose by 2.8% to close at $48.28 per share on May 12, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.88%, 0.27%, and 8.5%, respectively, as of the same day. This means that VSTO is trading 0.13% below its 20-day moving average, 3.1% below its 50-day moving average, and 4.0% above its 200-day moving average.

Understanding Vista Outdoor’s Top and Bottom Lines in 4Q16

Related ETFs and peers

The Guggenheim Spin-Off ETF (CSD) invests 4.6% of its holdings in Vista Outdoor. The ETF tracks an index of US-listed stocks spun off from corporate parents over the past 30 months. The index holds companies of all sizes. The YTD price movement of CSD was 1.7% as of May 12, 2016.

The iShares Morningstar Small Core ETF (JKJ) invests 0.55% of its holdings in Vista Outdoor. The ETF tracks a market-cap-weighted index of US small-cap core stocks. The index selects stocks from 90%–97% of market cap that falls into Morningstar’s core style categorization.

The market caps of Vista Outdoor’s competitors are as follows:

  • Sturm, Ruger & Company (RGR)—$1.3 billion
  • Smith & Wesson Holding (SWHC)—$1.3 billion
  • Orbital ATK (OA)—$5.2 billion

Performance of Vista Outdoor in 4Q16 and 2016

Vista Outdoor reported fiscal 4Q16 net sales of $612.3 million, a rise of 26.1% as compared to net sales of $485.4 million in fiscal 4Q15. The company’s cost of sales as a percentage of net sales fell by 2.0%, and its EBIT (earnings before interest and tax) rose by 75.2% in fiscal 4Q16 as compared to the prior year period.

Its net income and EPS (earnings per share) rose to $37.3 million and $0.61, respectively, in fiscal 4Q16, as compared to $15.9 million and $0.25, respectively, in fiscal 4Q15. It reported adjusted EPS of $0.63 in fiscal 4Q16, a rise of 34% over fiscal 4Q15.

Fiscal 2016 results

In fiscal 2016, VSTO reported net sales of $2.3 billion, a rise of 9.0% YoY (year-over-year). Its net income and EPS rose to $147 million and $2.35, respectively, in fiscal 2016, compared to $79.5 million and $1.25, respectively, in fiscal 2015.

Vista Outdoor’s cash and cash equivalents fell by 42.5%, and its inventories rose by 17.2% in fiscal 2016. Its current ratio fell to 2.8x, and its debt-to-equity ratio rose to 0.77x in fiscal 2016, as compared to a current ratio and a debt-to-equity ratio of 3.3x and 0.52x, respectively, in fiscal 2015. It reported free cash flow of $163 million in fiscal 2016, a rise of 2.0% as compared to fiscal 2015.

Projection

The company has made the following projections for fiscal 2017:

  • sales of $2.72 billion–$2.78 billion
  • interest expense of ~$45 million
  • tax rate of ~37%
  • EPS of $2.65–$2.85
  • capital expenditure of ~$90 million
  • free cash flow of $130 million-$160 million

This guidance does not include any impact of future strategic acquisitions, divestitures, investments, business combinations, or other transactions.

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