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Bear of the Day: Vista Outdoor (VSTO)

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Vista Outdoor Inc. (VSTO - Free Report) develops and manufactures ammunition, long guns, and related outdoor equipment products. Their main customer base includes sport-shooting enthusiasts, hunters, and federal and local law enforcement agencies.

Last month, Vista reported a worse-than-expected fiscal 2020 first quarter. A loss of $0.08 on revenue of $459.77 million both missed the Zacks Consensus Estimate; revenue fell 13% year-over-year, while gross profit was down 16% from the prior-year-period.

Vista recently divested its firearm business, and with a turnaround now in place, the company needed to reset its full-year outlook. Fiscal 2020 earnings are now expected between $0.10 to $0.25 per share, down from $0.28 and $0.38 per share; Vista also cut its revenue guidance to $1.79 billion to $1.89 billion from $1.94 billion to $2.03 billion.

Analysts have since turned bearish on Vista, with three cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to decline about 7% for the year, and the Zacks Consensus Estimate has dropped 13 cents during that same time period from $0.26 to $0.13 per share. This sentiment has stretched into 2021. While earnings could see positive growth, our consensus estimate has dropped 12 cents in the past two months.

VSTO is now a Zacks Rank #5 (Strong Sell).

Shares of the outdoor equipment maker have slumped 42% since January compared to the S&P 500’s gain of about 19.5%.

Bottom Line

Despite being able to slash its debt by $150 million as a result of the sale, Vista’s firearm divestiture turnaround plan will prove tough for the company, especially now that Walmart (WMT - Free Report) is banning the sale of all handgun ammunition and certain long-gun rounds.

Investors who are interested in adding a leisure and recreation peer to their portfolio should take a look at Zacks Rank #2 (Buy) ranked Callaway Golf , up about 26% year-to-date.

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