ROTH Capital Downgrades Vista Outdoor to ‘Neutral’

Price movement

Vista Outdoor (VSTO) has a market cap of $1.8 billion and fell 21.7% to close at $29.58 per share on January 12, 2017. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -24.8%, -23.2%, and -19.8%, respectively, on the same day.

VSTO is now trading 22.0% below its 20-day moving average, 23.6% below its 50-day moving average, and 32.2% below its 200-day moving average.

ROTH Capital Downgrades Vista Outdoor to ‘Neutral’

Related ETF and peers

The First Trust Consumer Discretionary AlphaDex ETF (FXD) invests 1.1% of its holdings in Vista Outdoor. The YTD price movement of FXD was 0.25% on January 12.

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

  • Sturm, Ruger & Company (RGR): $983.5 million
  • Orbital ATK (OA): $5.2 billion

VSTO’s rating and latest news

On January 12, 2017, ROTH Capital has downgraded Vista Outdoor’s rating to “neutral” from “buy.”

In a press release, Vista Outdoor reported, “Vista Outdoor…announced today that it expects to record a material, non-cash intangible asset impairment charge in its Hunting and Shooting Accessories reporting unit (archery and hunting accessories, golf, optics, shooting accessories, and tactical products) in the third quarter of its Fiscal Year 2017.”

The press release added: “The company does not expect the impairment charge to have any impact on future operations, affect its liquidity, affect cash flows from operating activities, or affect compliance with the financial covenants set forth in its debt instruments.”

Vista Outdoor’s performance in fiscal 2Q17

Vista Outdoor reported fiscal 2Q17 net sales of $684.3 million—a rise of 24.1%, as compared to its net sales of $551.4 million in fiscal 2Q16. The company’s gross profit margin and EBIT (earnings before interest and tax) margin expanded 10 basis points and 430 basis points, respectively, in fiscal 2Q17 over 2Q16.

Its net income and EPS (earnings per share) rose to $73.2 million and $1.22, respectively, in fiscal 2Q17, as compared to $32.7 million and $0.52, respectively, in fiscal 2Q16. It reported adjusted EPS of $0.74 in fiscal 2Q17—a rise of 17.5% over fiscal 2Q16.

VSTO’s cash and cash equivalents fell 68.2%, and its net inventories rose 30.8% between fiscal 2Q17 and fiscal 4Q16.

Projections

Vista Outdoor has made the following projections for fiscal 2017:

  • sales of $2.7 billion–$2.8 billion
  • adjusted EPS of $2.65–$2.85
  • free cash flow of $130 million–$160 million

This guidance doesn’t include the impact of future strategic acquisitions, divestitures, investments, business combinations or other transactions, contingent consideration revaluations, transition expenses, or inventory step-ups for completed acquisitions, but it does include the company’s acquisition of Camp Chef.

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