What happened 

Shares of Vista Outdoor Inc. (NYSE:VSTO) fell 62% in 2017, according to data from S&P Global Market Intelligence, as firearm sales plunged in the United States. The company is restructuring in an effort to focus on key brands, but if the core firearm business doesn't recover in 2018, it could be difficult for shares to regain last year's losses. 

So what 

Fiscal second-quarter results give a good snapshot of why the year was so bad for Vista Outdoor's stock. Revenue was down 14% to $586 million and would have fallen 16% on an organic basis if not for acquisitions. Even worse, adjusted earnings per share fell from $0.74 per share a year ago to $0.34 in the quarter. 

Hunter shooting at prey in field.

Image source: Getty Images.

Sales have been falling as gun sales drop in the United States. A favorable political environment with Republicans in control of Congress and the White House hasn't given gun buyers any urgency, and that's why sales are down. It could be another three years until there's a threat of gun regulation, so operations may not turn around anytime soon. 

Management said it will sell the Bolle, Serengeti, and Cebe brands and could consider selling other non-core brands. That may raise cash, but it will also increase the company's exposure to the volatile gun business. 

Now what 

Despite all of the challenges, management expects adjusted earnings of $0.50 to $0.60 per share, meaning shares trade at about 25 times the current depressed earnings level. If gun sales recover and Vista Outdoor's other business lines remain steady, the stock could be a good value for investors. It will be a volatile ride, but long-term this is a company with significant potential both in firearms and sporting goods. 

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