Wedbush On American Outdoor Brands: Turnaround On Track

American Outdoor Brands Corp AOBC reported Thursday a top-and-bottom line beat in its fiscal second-quarter results, which signals management's turnaround plan remains on track, according to Wedbush.

The Analyst

Wedbush's James Hardiman maintains an Outperform rating on American Outdoor Brands with an unchanged $15.30 price target.

The Thesis

American Outdoor's quarter showed an 11 percent increase in total firearm sales, which outperformed the 1 percent growth expected, Hardiman said. The company benefited from promotional activity and new product launches like the M&P Shield 380 EZ pistol.

Encouragingly, the sales growth in guns outperformed the industry based on overall adjusted NICS background checks which were 9 percent lower in the quarter while handgun background checks were down 9 percent.

The Outdoor Products & Accessories division saw sales rise 5 percent, which was short of the 7 percent expected as new products in shooting accessories and cutlery were partially offset by lower revenue from survival equipment and optics.

The earnings print also showed a gross margin expansion of 60 basis points to 34.9 percent. While this still short of the 35.9 percent Wedbush modeled, it did come in ahead of the Street's estimate of 34.7 percent.

The timing of a recovery in monthly NICS results may be difficult to predict but the company's earnings potential appears to be "independent of broader industry demand," the analyst wrote. For the company to see clear momentum, the NICS figures need to at the very least start flattening in the months ahead.

Price Action

Shares of American Outdoor Brands were trading higher by more than 13 percent at $13.87 Friday afternoon.

Related Links:

Why American Outdoors Guidance Was Much Better Than Expected

Despite Recent Weakness, American Outdoor Brands Could Be Headed Higher