U.S. Markets closed

VSTO Rose on New Gun Rules, KKR Acquired Mills Fleet Farm

Gabriel Kane

LULU, CRI, and STZ Led the Consumer Sector at the Start of 2016

(Continued from Prior Part)

Price movement of Vista Outdoor

After the tightening of US gun rules by the US Bureau of Alcohol, Tobacco, Firearms and Explosives (or ATF), Vista Outdoor (VSTO) rose by 3.1% to close at $46.70 per share as of January 5, 2015.

The stock’s price movements on a weekly, monthly, and YTD basis are 5.2%, 10.0%, and 4.9%, respectively.

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 Guggenheim S&P MidCap 400 Pure Growth ETF (RFG) invests 1.6% of its holdings in Vista Outdoor. The ETF tracks a factor-weighted index of the S&P 400 companies exhibiting the strongest growth factors.

Competitors of Vista Outdoor and their market capitalizations are as follows:

  • Orbital ATK (OA) — $5.4 billion
  • Olin (OLN) — $2.9 billion
  • Sturm, Ruger & Company (RGR) — $1.2 billion

Impact of new gun rules on Vista Outdoor

According to the US Bureau of ATF, “The 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 Barack Obama in which he focused on the tightening of gun control rules 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 gun demand before the implementation of this new rule.

Performance of Vista Outdoor in latest 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 $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 0.56 in fiscal 1Q16.

Projections

The company has made the following projections for fiscal 2016:

  • Sales in the range of $2.17–$2.24 billion
  • Adjusted EPS in the range of $2.05–$2.30
  • Free cash flow in the range of $150–$180 million

KKR acquired Mills Fleet Farm

KKR, a leading investment company, has entered into a definitive purchase agreement to acquire Mills Fleet Farm, a retailer of lifestyle merchandise serving active outdoor families as well as suburban and farm customers. The financial terms have not been disclosed.

Continue to Next Part

Browse this series on Market Realist: