Why American Outdoor Brands Stock Just Crashed 15%

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What happened

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Shares of American Outdoor Brands (NASDAQ: AOBC) -- formerly known as Smith & Wesson -- crashed in early Friday trading after the gunsmith reported a small per-share loss for its fiscal first-quarter 2018. As of 11 a.m. EDT, the stock was down a good 15.5%.

So what

First-quarter sales plunged 37.7% at American Outdoor Brands, landing with a thump at $129 million. Gross margins fell off a cliff, down an astounding 1,080 basis points to 31.5%. Given the magnitude of these declines, the fact that American Outdoor lost only $0.04 per share almost comes as a relief.

Almost. Four cents still is a pretty big letdown when compared to the $0.62 per share in profit that American Outdoor Brands earned in Q1 of last year. Moreover, analysts had been telling investors to expect no worse than a dip to an $0.11 (pro forma) profit this quarter. Excluding so-called one-time charges, American Outdoor Brands says its pro forma profit for the quarter was only $0.02.

Now what

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In a nutshell, this is why American Outdoor Brands stock is down so much: The stock "missed earnings," and it lost money, too. And the news isn't likely to get much better anytime soon.

Compounding the bad news with a gloomy forecast, American Outdoor Brands management warned investors to expect no more than a nickel-a-share in GAAP profit this current quarter ($0.12 per share, pro forma) and quite possibly less than that. For the full year, it expects GAAP earnings to range between $0.77 and $0.97 per share, with pro forma profits of somewhere between $1.04 and $1.24. Meanwhile, Wall Street had been telling investors to expect $1.54 in pro forma profits this year.

If you were hoping for good news out of American Outdoor Brands last quarter, you were disappointed today -- and can expect to receive more disappointment for the rest of this year as well.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.