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Vista Outdoor (NYSE:VSTO) Misses Q1 Sales Targets

Published 05/08/2024, 05:01 PM
Updated 05/08/2024, 05:41 PM
Vista Outdoor (NYSE:VSTO) Misses Q1 Sales Targets

Sports and recreation company (NYSE:VSTO) missed analysts' expectations in Q1 CY2024, with revenue down 6.4% year on year to $693.7 million. The company's full-year revenue guidance of $2.72 billion at the midpoint also came in 4.3% below analysts' estimates. It made a GAAP profit of $0.69 per share, improving from its loss of $5.19 per share in the same quarter last year.

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Vista Outdoor (NYSE:VSTO) Q1 CY2024 Highlights:

  • Revenue: $693.7 million vs analyst estimates of $702.1 million (1.2% miss)
  • EPS: $0.69 vs analyst expectations of $0.98 (29.2% miss)
  • Management's revenue guidance for the upcoming financial year 2025 is $2.72 billion at the midpoint, missing analyst estimates by 4.3% and implying -0.9% growth (vs -10.7% in FY2024)
  • Gross Margin (GAAP): 31.8%, in line with the same quarter last year
  • Free Cash Flow of $149.5 million, up 18% from the previous quarter
  • Market Capitalization: $2.09 billion
“I am proud of the work our teams at Revelyst and The Kinetic Group have accomplished and our results demonstrate that the strategic direction of Vista Outdoor is the right one,” said Eric Nyman, Co-CEO of Vista Outdoor and CEO of Revelyst.

Emerging from a 2015 spin-off, Vista Outdoor (NYSE:VSTO) specializes in the production and sale of outdoor gear and shooting sports equipment.

Leisure ProductsLeisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.

Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Vista Outdoor's annualized revenue growth rate of 6.1% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Vista Outdoor's recent history shows a reversal from its already weak five-year trend as its revenue has shown annualized declines of 5% over the last two years.

This quarter, Vista Outdoor missed Wall Street's estimates and reported a rather uninspiring 6.4% year-on-year revenue decline, generating $693.7 million of revenue. Looking ahead, Wall Street expects sales to grow 2.4% over the next 12 months, an acceleration from this quarter.

Operating MarginOperating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Vista Outdoor has done a decent job managing its expenses over the last eight quarters. The company has produced an average operating margin of 12.4%, higher than the broader consumer discretionary sector. In Q1, Vista Outdoor generated an operating profit margin of 9%, up 2.3 percentage points year on year.

Over the next 12 months, Wall Street expects Vista Outdoor to become more profitable. Analysts are expecting the company’s LTM operating margin of 9.9% to rise to 13.6%.Key Takeaways from Vista Outdoor's Q1 Results We struggled to find many strong positives in these results. While its free cash flow was up 18% from the previous quarter, Vista Outdoor sizably missed analysts' EPS expectations. In addition, its revenue and full-year revenue guidance missed Wall Street's estimates. Overall, this was a subpar quarter for Vista Outdoor. The company is down 2.7% on the results and currently trades at $34.69 per share.

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