A big charge to earnings paints a target on Vista's back. Image source: Getty Images.

What happened

Sporting goods and guns 'n' ammo stock Vista Outdoor (VSTO -0.89%) shares dropped nearly 26% in early trading Thursday, before rebounding to a more muted loss of 22% as of noon EST.

So what

Vista warned us this morning that it "expects to record a material, non-cash intangible asset impairment charge" in fiscal third-quarter 2017 at its "hunting and shooting accessories reporting unit," the business that sells archery and hunting accessories and golf gear, as well as gun sights, shooting accessories, and other tactical products.

Vista has not finalized the size of this goodwill impairment charge, but estimates that it will probably range between $400 million and $450 million. That sounds bad, and it gets worse.

According to analyst estimates quoted on S&P Global Market Intelligence, Vista was only expected to report about $79 million in operating earnings in Q3 ($42 million net) before this writedown. Factoring the charge into the equation, the company looks more likely to report at least a $320 million operating loss.

Now what

Put another way, in a quarter when investors were expecting Vista to report net profits of $0.70 per share, the company is instead going to report losses probably on the order of $5 a share or more. Management insists it still sees "long-term growth in all of our reporting units" in its future, and that it remains "confident in ... our growth strategy and ... optimistic about our businesses and our future opportunities." But given the size of the expected loss, it's no wonder some investors are unwilling to stick around and see how this plays out.