Did Ammo Sales Push Vista Outdoor Stock Higher?

Vista Outdoor Inc. (NYSE: VSTO) reported third-quarter fiscal 2020 results before markets opened Thursday. The ammunition and outdoor products company posted adjusted diluted earnings per share (EPS) of $0.21 on revenues of $424.77 million. In the same quarter a year ago, Vista reported EPS of $0.09 on revenues of $467.77 million. The consensus estimates for the latest quarter called for EPS of $0.13 per share and $419.47 million in revenue.

Gross profit declined by 6% year over year to $89 million. Operating expenses dropped from $609 million to $70 million on a GAAP basis and from $80 million to $70 million on an adjusted basis. Cash flow from operations now totals $63 million, slightly better than last year’s $61 million for the first three-quarters of Vista’s fiscal year. Free cash flow for the year to date has slipped from $51 million a year ago to $46 million this year. At the end of the second quarter, Vista’s free cash flow total for the year was negative $23 million.

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CEO Chris Metz said:

We are pleased to see continued stabilization of the ammunition market, alongside year over year growth for many of our brands. Notably, our Ammunition business delivered positive revenue growth for the first time in eleven quarters. While the external environment remains fluid, we continue to favorably position Vista Outdoor to deliver strong, profitable growth, and increased free cash flow.

Vista also updated its guidance for the 2020 fiscal year. Estimated adjusted EPS was tightened from a range of $0.10 to $0.25 to a new range of $0.15 to $0.20. The estimate for full-year free cash flow was raised from $30 million to $40 million to a new range of $40 million to $50 million. Originally the company expected 2020 free cash flow in a range of $55 million to $65 million. Vista also lowered the top end of its revenue forecast from a prior range of $1.75 to $1.85 billion to a new one of $1.75 to $1.80 billion.

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Sales in the company’s shooting sports segment dropped by 16% year over year to $202 million. Ammo sales rose 2%, while adjusted gross profit tumbled from $40.48 million to $32.76 million.

Sales in the outdoor products segment were down 2% to $222 million year over year, but gross profit rose by 3.5% to $56 million. Adjusted gross profit fell by 1%.

The company did not provide fiscal fourth-quarter guidance. Analysts are projecting EPS of $0.11 on sales of $466.22 million. In the fourth quarter of last year, adjusted EPS totaled $0.01 on sales of $515.34 million.

Vista still needs to figure out a way to lift its shooting sports segment’s contribution to sales and profits. Either that or try to find a buyer for it. Another possibility also exists, but we’ll leave that as an exercise for readers.

Vista’s shares closed up about 11.8% on Wednesday, at $8.43 in a 52-week range of $4.30 to $10.42, and were inactive in Thursday’s premarket. The 12-month consensus price target is $10.75.

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