American Outdoor Brands Corp 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.
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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Photo courtesy of Smith & Wesson.
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