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Vista Outdoor Reports Mixed Quarterly Results for 1Q17

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Price movement

Vista Outdoor (VSTO) has a market cap of $2.7 billion. It fell by 16.7% to close at $42.75 per share on August 11, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -17.1%, -14.4%, and -4.0%, respectively, on the same day. VSTO is trading 15.3% below its 20-day moving average, 12.9% below its 50-day moving average, and 10.1% 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 midcap 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 11.

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

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.

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