Shares of Smith & Wesson owner American Outdoor Brands (AOBC) - Get Report were falling Friday, plummeting 40% to $6.25, after missing Wall Street's fiscal third-quarter earnings and revenue forecasts and fourth-quarter guidance.
The Springfield, Massachusetts-based gun manufacturer posted third-quarter net income of $5.7 million, or 10 cents a share, compared with a loss of $5.7 million, or 10 cents a share, a year ago. Adjusted earnings came to 13 cents a share, missing FactSet's call for 23 cents a share.
Sales totaled $166.7 million, up from $162 million a year ago, but fell short of Factset's forecast of $187.3 million.
The company said revenue was partially offset by reduced OEM (original equipment manufacturer) sales of its laser sight products, bankruptcy and financial distress of certain customers, and the acceleration of one brick-and-mortar retailer's private label strategy for camping accessories away from its branded survival products.
Scott Stember, an analyst with CL King, said that he still sees the company "continuing to outperform the market in both sides of the business, with new product introductions gaining traction with consumers.”
Stember warned, however, "that much of the sharp increase in industry firearms demand has been driven by elevated promo activity, which should continue to compromise industry-wide margins.”
Cowen analyst Cai von Rumohr said in a note to clients that the earnings miss "reflected multiple one-timers," adding that fiscal 2021 should be a stronger year.
He also said that strategic retailer de-stocking and manufacturing delays related to the coronavirus should end in fiscal fourth-quarter.
Wedbush analyst James Hardiman said that while the company "appeared to be well-positioned to withstand the coronavirus free-fall, idiosyncratic industry events and company missteps will likely have the stock give back all of its year-to-date gains."
Looking ahead, American Outdoor Brands said it expects fourth-quarter earnings of 33 cents to 37 cents a share and sales of $205 million to $215 million. Wall Street is calling for earnings of 45 cents a share and sales of $224.3 million.
In January, American Outdoor Brands announced that President, CEO and board director James Debney has left the company after the board found that he engaged in conduct “inconsistent with a non-financial company policy.”
The board named Mark Smith and Brian Murphy as co-presidents and co-CEOs. Smith was most recently president of the manufacturing services division of the company, while Murphy was most recently president of the outdoor products and accessories division.
In addition, the company said it was moving forward with its plan to spin-off its outdoor products and accessories business in the second half of the year, which will create two independent publicly traded companies.