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Monness Crespi Hardt Downgrades Vista Outdoor to ‘Neutral’

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Aug. 18 2020, Updated 4:44 a.m. ET

Price movement

Vista Outdoor (VSTO) has a market cap of $2.6 billion. It fell by 1.9% to close at $41.96 per share on August 12, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -18.7%, -15.9%, and -5.7%, respectively, on the same day. VSTO is trading 16.3% below its 20-day moving average, 14.2% below its 50-day moving average, and 11.7% below its 200-day moving average.

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Related ETFs and peers

The First Trust Consumer Discretionary AlphaDex ETF (FXD) invests 0.86% of its holdings in Vista Outdoor. The ETF tracks an index of large and mid-cap US consumer discretionary stocks. The underlying index uses multifactor selection and tiered equal weighting. The YTD price movement of FXD was 6.0% on August 12.

The iShares Morningstar Small Core ETF (JKJ) invests 0.57% 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 fall into Morningstar’ core style categorization.

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

  • Sturm, Ruger & Co. (RGR) — $1.3 billion
  • Smith & Wesson (SWHC) — $1.7 billion
  • Orbital ATK (OA) — $4.3 billion

Vista Outdoor’s rating

Monness Crespi Hardt has downgraded Vista Outdoor’s rating to “neutral” from “buy.”

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Performance of Vista Outdoor in fiscal 1Q17

Vista Outdoor reported fiscal 1Q17 net sales of $630.3 million, a rise of 22.5% over the net sales of $514.5 million in fiscal 1Q16. The company’s gross profit margin and EBIT (earnings before interest and income tax) rose by 0.44% and 0.17%, respectively, between fiscals 1Q16 and 1Q17.

Its net income and EPS (earnings per share) fell to $29.1 million and $0.48, respectively, in fiscal 1Q17, compared with $33.9 million and $0.53, respectively, in fiscal 1Q16. VSTO’s cash and cash equivalents fell by 56.5% and its net inventories rose by 25.8% between fiscals 4Q16 and 1Q17. Its current ratio fell to 2.3x and its debt-to-equity ratio rose to 1.1x in fiscal 1Q17, compared with 2.8x and 0.77x, respectively, in fiscal 4Q16.

Projections

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%
  • adjusted 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, contingent consideration revaluation, transition expenses, or inventory step-ups for completed acquisitions.

In the next part of this series, we’ll take a look at Flowers Foods (FLO).

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