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Wedbush: American Outdoor Brands 'Unlikely To Be Met With Excitement' After Guidance Left Unchanged

Priya Nigam

American Outdoor Brands Corp (NASDAQ: AOBC) reported higher-than-expected third-quarter EPS Thursday on the back of margin expansion. Investors may consider the firearms manufacturer's unchanged full-year guidance as a sign of a worsening overall outlook, according to Wedbush.

The Analyst

Wedbush’s James Hardiman maintained an Outperform rating on American Outdoor Brands and reducing the price target from $15.30 to $13.50.

The Thesis

The Smith & Wesson parent company reported non-GAAP EPS of 16 cents, ahead of the consensus estimate of 12 cents. Revenue came in at $162 million, representing 3-percent growth and beating the consensus expectation of $161 million.

The beat was driven mainly by improved gross margins, which expanded 350 bps to 33.4 percent versus the Street’s 32.9-percent estimate, Hardiman said in a Friday note. 

American Outdoor brands left its FY19 EPS and revenue guidance unchanged at a range of 69-73 cents and $625-$635 million, respectively. The unchanged guide implies lower fourth-quarter projections, which management attributed to shifts in costs between the two quarters, the analyst said. 

Although the company has not meaningfully changed its outlook on the firearm industry, it continues to expect to grow in FY20 even in the absence of a recovery in demand, Hardiman said. 

View more earnings on AOBC

This growth “is unlikely to be met with the same excitement by the Street," the analyst said. 

Price Action

Shares of American Outdoor Brands were plunging nearly 8 percent to $10.47 at the time of publication Friday. 

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American Outdoor Brands Q3 Earnings Preview

Photo courtesy of Smith & Wesson. 

Latest Ratings for AOBC

Date Firm Action From To
Mar 2019 Wedbush Maintains Outperform Outperform
Dec 2018 Wedbush Maintains Outperform Outperform
Nov 2018 Craig-Hallum Downgrades Buy Hold

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