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Why American Outdoor Brands Fell 21% at the Open Today

By Reuben Gregg Brewer - Jul 16, 2021 at 9:39AM

Key Points

  • After a great year, investors were clearly expecting more from American Outdoor Brands when it provided guidance.

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The outdoor gear maker posted strong earnings results, but the problem was really the outlook for the future.

What happened

Shares of American Outdoor Brands (AOUT 1.12%) fell 21% in early trading on July 16. The drop was precipitated by the release of the company's fourth-quarter fiscal 2021 earnings, which was pretty impressive. The guidance for fiscal 2022 is where things got a little troubling.

So what

The diversified outdoor and sports equipment maker had revenue of $64.5 million in the fiscal fourth quarter of 2021, up nearly 50% compared to the year-ago period. For the full year, sales of nearly $277 million were higher by 65%. Both periods were supported by strong online results. Adjusted net income for the fourth quarter was $0.34 per share, up from a $0.01-per-share loss, with full-year adjusted net income chiming in at $2.32 per share, an increase from the previous year's $0.23. All in, it was a pretty good year.

A person holding their face with a computer showing stock losses in the background.

Image source: Getty Images.

That said, there were some complicating factors that investors need to understand. First, fiscal 2021 was the first full year for the company following its spin-off from Smith & Wesson in August 2020. So year-over-year comparisons here are more complicated than they look. And the global pandemic materially altered consumer behavior, including pushing people toward more solitary outdoor activities and shopping online. Both were likely benefits, even though they could be temporary. Which is why American Outdoor Brands' fiscal 2022 outlook isn't quite as inspiring as its fiscal 2021 results, with the company projecting adjusted net income per share falling between $2.02 and $2.26. The top end of the range suggests that the company's adjusted net income per share will fall nearly 3%.  

Now what

Wall Street is generally forward-looking, so it probably shouldn't be too surprising that the company's fiscal 2022 guidance was taken poorly. That said, with such a strong performance in fiscal 2021 and the unusual period it represents, it might be prudent for long-term investors to think over a two-year period here. Indeed, a little giveback after a great year might not be so bad annualized over two years.

Reuben Gregg Brewer 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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American Outdoor Brands, Inc. Stock Quote
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