Why PSG Is Getting Mauled

By Chris Lange Updated Jan 13, 12:13PM EST · Published Mar 8, 12:05PM EST

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Why PSG Is Getting Mauled — © Thinkstock

Performance Sports Group Ltd. (NYSE: PSG) was mauled by the bears in Tuesday’s regular trading session, following an update to its fiscal third-quarter and fiscal full-year financial results. Whenever companies adjust guidance ahead of an earnings report, usually we can expect some serious movement, and considering the adjustments, this is not surprising for PSG.

The company reduced its fiscal 2016 EPS guidance by roughly $0.55 per share to a range of $0.12 to $0.14 per share. Its prior published guidance called for EPS in the range of $0.66 to $0.69. For the full year, the consensus EPS estimate from Thomson Reuters is $0.65.

As for the third quarter, PSG expects to have a net loss of $0.29 per share, or a net loss of $0.16 per share on a constant currency basis. The same period last year had $0.13 in EPS. The consensus estimate calls for $0.09 per share for the third quarter.

In terms of revenue, guidance now expects $125 million in revenue, or $130 million on a constant currency basis. The third quarter from last year had $137.75 million in revenue. The revenue consensus estimate was $136.15 million.
[nativounit]
EPS in the fourth quarter is expected to be roughly $0.15 to $0.17 per share ($0.20 to $0.22 per diluted share on a constant currency basis), compared to EPS of $0.32 per diluted share in the same quarter last year. The consensus EPS estimate for the fourth quarter is $0.30.

Kevin Davis, chief executive officer of PSG, commented:

The second half of fiscal 2016 has been impacted by adverse market conditions and related customer credit issues. The baseball/softball market is experiencing an unexpected significant downturn in retail sales, including in our important bat category. This weakening of consumer demand, coupled with the chapter 11 filing by one of the largest U.S. national sporting goods retailers, is reducing our sales for baseball and softball products. Additionally, the consolidation of hockey retail in the U.S. has reduced our customers’ demand for products more than we previously anticipated as they continue to reduce their inventory levels.

Looking at the charts (excluding Tuesday’s movement), PSG has underperformed the broad markets in 2016, with the stock down 10% year to date. Over the course of the past 52 weeks, the stock is down 55%.

Shares of PSG were trading down 63% at $3.19 on Tuesday, with a consensus analyst price target of $13.25 and a 52-week trading range of $2.95 to $21.72.

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.