What happened

Shares of Vista Outdoor (NYSE:VSTO) traded up 25% on Thursday afternoon, and were up as much as 33% midday, after the sporting goods accessories manufacturer reported quarterly results. They were mixed, and Vista Outdoor cut its guidance for fiscal 2020, but investors had been worried the report would be much worse than it was.

So what

Vista reported break-even adjusted earnings per share, ahead of the consensus estimate for a $0.10 per share loss, on revenue of $445 million that beat the consensus by more than 3%. The company's outdoor products division generated sales of $234 million for the quarter, down 14% from the same three months of last year, while revenue at the shooting-sports division was down 23% year over year to $211 million.

Hiking gear left on a mountain trail.

Image source: Getty Images.

Vista Outdoor is a company in transition, having sold off its firearms business to focus on a portfolio of about 50 brands, including Bell, Bushnell, CamelBak, and Camp Chef, that serve bicycling, camping, and hiking enthusiasts. Shares were down more than 40% year to date coming into earnings, in part because of a worse-than-expected first quarter.

The company is showing progress in paying down debt, reporting long-term debt of $578 million at quarter's end. That's down from a peak balance of $1.176 billion.

Although Vista Outdoor sold its firearms business, it is still linked to the business through its large ammunition segment, and the company continues to be weighed down by a weakness in the firearms market. Adjusted gross margins in the shooting-sports division fell more than 400 basis points year over year due to a sales decline in ammunition, and soft sales in hunting and shooting accessories weighed on the outdoor products division.

The ammunition business was hampered by a distributor bankruptcy, and the decision by Walmart earlier this year to stop selling certain types of ammo.

Now what

Things are not going to get easier for Vista Outdoor anytime soon. The consumer discretionary company cut its full fiscal 2020 earnings guidance to a loss of $0.23 to $0.08 per share, down from a previous range of a $0.03 per share loss to a $0.12 profit, due to restructuring costs and asset impairments. The company did back its full-year adjusted earnings guidance of $0.10 to $0.25 per share on revenue of between $1.75 billion and $1.83 billion, within range of the consensus estimate for $0.14 per share in full-year adjusted earnings on sales of $1.83 billion.

There are good brands in this portfolio, but also lots of uncertainty, including an ongoing national gun control debate that is out of the company's control. Vista made good progress in the recently completed quarter, but there remain far too many question marks for investors to jump in right now.