Vista Outdoor (VSTO) Hits 52-Week High: What's Driving it?
Vista Outdoor Inc. VSTO reached a new 52-week high of $32.18 on Sep 21. The stock pulled back to end of the trading session at $31.76, up 1.7% from the previous day’s closing price of $31.22.
The company’s uptrend is attributable to its focus on restructuring and profit improvement initiatives for the Outdoor Products segment, reflecting solid segmental performance along with accretive acquisitions. Despite the lingering market challenges, it remains optimistic about its growth prospects in fiscal 2024 as well as long term through various strategic initiatives.
Stock Performance
This Zacks Rank #2 (Buy) stock gained 28% in the past year compared with the Zacks Leisure and Recreation Products industry’s 11% growth, the Zacks Consumer Discretionary sector’s increase of 12.4% and the S&P 500 Index’s rise of 17.5%.
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Earnings estimate for fiscal 2024 has moved up to $4.69 per share from $4.61 in the past 60 days. The positive trend signifies bullish sentiments of analysts, indicating robust fundamentals and sparking the expectation of an outperformance in the near term.
What’s Making the Stock Attractive?
Focus on Improvement Initiatives: To counter the negative impacts of macroeconomic uncertainties and organic decline, Vista Outdoor introduced a new restructuring and profit improvement initiative in fourth-quarter fiscal 2023. As part of the initiative, it launched a cost reduction and earnings improvement program of more than $50 million. This strategic action is intended on achieving meaningful margin improvement from fiscal 2024.
The program’s implementation started showing its results from first-quarter fiscal 2024. During the quarter, the Outdoor Products segment witnessed a 473 basis points (bps) sequential improvement in adjusted EBITDA margin. Also, corporate expenses were $8 million lower, sequentially.
Considering the upward trend, VSTO now expects the segmental adjusted EBITDA margin to be above 10% in second quarter. The metric is projected in the range of 12-13% by fourth quarter.
Outdoor Products Segment Boosting Growth: The company is quite optimistic about this segment’s performance outlook, given the diverse brands housed under its portfolio. There are 34 brands operating under this segment that contributed 4.7% to the consolidated sales value in first-quarter fiscal 2024. Segmental sales increased 8% year over year mainly driven by acquisitions. Also, segmental gross profit grew 3% year over year to $95 million in the quarter.
Furthermore, Vista Outdoor’s decision to execute Planned Separation will result in a split of its two reportable segments, Outdoor Products and Sporting Products, into two independent, publicly traded companies. From the Outdoor Products segment’s perspective, VSTO believes that this spinoff will unlock shareholders’ value and highlight this segment’s position among its peers in the competitive market. The partition will enable it to realize the value earned from this segment which was otherwise not reflected in its results, thus accelerating growth prospects.
Accretive Buyouts: Vista Outdoor indulges in making strategic profitable acquisitions to expand its product portfolio and market share. During second-quarter fiscal 2023 it made two portfolio-shifting acquisitions, which are included in its Outdoor Products segment.
VSTO acquired Simms Fishing Products or Simms, a premium fishing brand and leading manufacturer of waders, outerwear, footwear and technical apparel. It also bought Fox Holdings, Inc. or Fox Racing, a leader in the motocross industry and a growing brand in the mountain bike category. The purchase price allocation for both these buyouts were finalized during fourth-quarter fiscal 2023.
Other Key Picks
Some other top-ranked stocks from the same sector are Royal Caribbean Cruises Ltd. RCL, Live Nation Entertainment, Inc. LYV and Guess?, Inc. GES.
Royal Caribbean presently sports a Zacks Rank #1 (Strong Buy). RCL has a trailing four-quarter earnings surprise of 28.5%, on average. The stock has surged 112.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates growth of 55.3% and 181.9%, respectively, from the year-ago period’s levels.
Live Nation currently flaunts a Zacks Rank of 1. LYV has a trailing four-quarter earnings surprise of 34.6%, on average. The stock has gained 6.2% in the past year.
The Zacks Consensus Estimate for LYV’s 2023 sales and EPS suggests rises of 21% and 57.8%, respectively, from the year-ago period’s levels.
Guess sports a Zacks Rank of 1 at present. GES has a trailing four-quarter earnings surprise of 43.4%, on average. The stock has increased 44.1% in the past year.
The Zacks Consensus Estimate for GES’ fiscal 2023 sales and EPS implies improvements of 3.7% and 9.9%, respectively, from the year-ago period’s levels.
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