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Why Vista Outdoor Inc. Stock Fell Tuesday

By Daniel Sparks – Updated May 1, 2018 at 11:59AM

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A wider-than-expected loss per share and a new business-transformation plan have some investors rethinking the stock's potential.

What happened

Shares of outdoor recreation and firearm company Vista Outdoor Inc. (VSTO -0.61%) fell as much as 17.3% on Tuesday, following the company's fiscal fourth-quarter earnings report. Though Vista's revenue for the period came in higher than expected, its loss per share was wider than the consensus analyst estimate for the key metric. In addition, Vista's outlook for fiscal 2019 profitability was weaker than expected.

Vista also announced a plan to begin exiting some product segments and to refocus on areas that management believes present the biggest opportunities.

A chalkboard sketch showing a stock price falling

Image source: Getty Images.

So what

For its fourth quarter of fiscal 2018, Vista reported revenue and adjusted earnings per share of $571 million and a loss of $0.22, respectively. These results compare to revenue and adjusted EPS of $579 million and $0.02 in the year-ago quarter. On average, analysts were expecting revenue of $520 million and a loss per share of $0.15.

For fiscal 2019, management said it expected sales to be between $2.205 billion and $2.265 billion and EPS to be between $0.10 and $0.30. On average, analysts were expecting fiscal 2019 sales and EPS of $2.6 billion and $0.58.

Now what

Alongside its financial results, Vista Outdoor announced its strategic business transformation plan, which is "designed to allow the company to focus resources on pursuing growth in its core product categories," the company said. As part of the plan, Vista will focus on the following product categories:

  • ammunition
  • hunting and shooting accessories
  • hydration bottles and packs
  • outdoor cooking products

For assets that fall outside of these product categories, Vista said it will "explore strategic options ..."

"Vista Outdoor expects that the execution of this process will significantly reduce the company's leverage, improve financial flexibility and the efficiency of its capital structure, and provide additional resources to reinvest in core product categories, both organically and through acquisition," management said.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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