Why American Outdoor Brands Stock Just Popped 15%

What happened

Once upon a time, American Outdoor Brands (NASDAQ:AOUT) was Smith & Wesson, the gunsmith. Then, it expanded beyond guns to build an outdoor camping and sporting equipment business. And then it spun off its firearms division (giving back its name, Smith & Wesson Brands) to focus entirely on sporting goods.

Today, that’s looking like a pretty smart decision, as American Outdoor Brands shares soar 15% through 10:40 a.m. EST after the company reported blowout earnings for the second quarter of fiscal 2021.

So what

Analysts had forecast that American Outdoor Brands would earn just $0.25 per share, pro forma, in fiscal Q2, on sales of $61 million. Instead, the company reported last night that Q2 earnings were $0.77 on sales of $79.1 million — a sizable earnings beat.

Sales for the quarter grew 66% year over year, with e-commerce sales in particular more than tripling. Gross margin climbed 690 basis points to 46.9%, and, while actual earnings as calculated according to generally accepted accounting principles (GAAP) didn’t quite achieve the heights of the company’s pro forma number, the company did earn $0.52 per share, reversing its year-ago GAAP loss.

Now what

Looking ahead to the remainder of this fiscal year, American Outdoor Brands now projects that it will end fiscal 2021 with sales of between $235 million and $245 million, earning GAAP profits of between $0.52 and $0.70.

As regards the pro forma numbers that Wall Street analysts tend to fixate upon, American Outdoor Brands projects that adjusted profits will range from $1.49 per share to $1.67 — $1.52 per share at the midpoint of the range, and therefore 74% above the $0.91 that Wall Street has forecast.

No wonder investors are pleased.