An Analysis of Consumer Sector Outliers VSTO, HAR, RAI, and SNE
Price movement of Vista Outdoor
Vista Outdoor (VSTO) has a market capitalization of $2.9 billion. After the tightening of gun rules by the US Bureau of Alcohol, Tobacco, Firearms and Explosives (or ATF), VSTO rose by 3.1% to close at $46.70 per share as of January 5, 2016. The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are 5.2%, 10.0%, and 4.9%, respectively.
At times, VSTO broke the support of all of its moving averages in 2015. Currently, VSTO is trading 6.4% above its 20-day moving average, 6.1% above its 50-day moving average, and 4.4% above its 200-day moving average.
The Guggenheim Spin-Off ETF (CSD) invests 4.6% of its holdings in Vista Outdoor. The ETF tracks an index of US-listed stocks spun off from corporate parents over the past 30 months. The index holds companies of all sizes. The YTD price movement of CSD is -10.3% as of January 4, 2016.
The Guggenheim S&P MidCap 400 Pure Growth ETF (RFG) invests 1.6% of its holdings in Vista Outdoor.
The competitors of Vista Outdoor and their market capitalizations are as follows:
- Orbital ATK (OA) — $5.4 billion
- Olin (OLN) — $2.9 billion
- Sturm, Ruger & Co. (RGR) — $1.2 billion
Impact of new gun rules on Vista Outdoor
According to the US Bureau of ATF, “Sellers have to check with the Federal Bureau of Investigation to determine any criminal records and mental health of the buyers that stops them from owning a gun.”
This change came into the picture after an interview with President Barack Obama. The president focused on the tightening of gun control rules in order to stop shootings in the United States.
After the announcement, Vista Outdoor, which designs, develops, and manufactures ammunition, long guns, and related equipment products, rose by 3.1% on the possibility of a rise in demand for guns before the implementation of the new rule.
Performance of Vista Outdoor in recent fiscal 2Q16
Vista Outdoor reported fiscal 2Q16 net sales of $551.4 million, a rise of 5.0% when compared to net sales of $525.1 million in fiscal 2Q15. Its adjusted net income and adjusted EPS (earnings per share) rose to $39.6 million and $0.63, respectively, in fiscal 2Q16, compared to adjusted net income and adjusted EPS of $38.1 million and $0.60, respectively, in fiscal 2Q15.
Meanwhile, VSTO’s cash and cash equivalents fell by 53.3%, and its net inventories rose by 16.8% in fiscal 2Q16 on a quarterly basis. Its debt-to-equity ratio rose to 0.77 in fiscal 2Q16 compared to a debt-to-equity ratio of 0.56 in fiscal 1Q16.
Vista Outdoor has made the following projections for fiscal 2016:
- Sales to be in the range of $2.17–$2.2 billion.
- Adjusted EPS in the range of $2.05–$2.30.
- Free cash flow in the range of $150–$180 million.
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