Americans Love The Outdoors And Johnson Outdoor Brands
Johnson Outdoor Brands (NASDAQ: JOUT) is among the least loved of the outdoor stocks being boosted by the pandemic. That is a shame because the stock is a high-quality company with a fortress balance sheet and a long-term outlook for solid growth. Among the company's many brands are Hummingbird and Minn Kota as well as Eureka, Jetboil, and Scubapro. The stock isn't what we would call a high-yielding issue with a dividend yield of only 0.71% but it is among the safest dividends you will find on Wall Street. Where so many other companies on Wall Street were forced to halt increases, cut distributions, or even suspended distributions during the pandemic, Johnson Outdoor Brands charged right ahead with the ninth consecutive annual increase and a large double-digit one at that. We expect to see similar dividend activity with the next declaration which is due out any day.
Johnson Outdoor Brands Comfortably Exceeds Expectations
There was a high expectation for Johnson Outdoor Brands’ results going into the fiscal Q3 report but it was not high enough. The company reported $213.60 million in net consolidated revenue to exceed the consensus estimate by 750 basis points. This is good for a growth of 54.3% versus last year's decline of -20 1% but the two-year comparison is more telling. Jonathan outdoor brand sales were impacted negatively by the initial round of COVID shutdowns and have bounced back very strongly. Sales are up 21% over F2019’s Q3 period and on track to continue growing from this level.
The company reports strong demand in all four of its operating segments. The core fishing segment grew by 52% with strength in all major product lines. The camping segment grew by 84% driven by strength in stoves and tents as well as the launch of a new Jetboil stove product. The watercraft segment grew by 30% and the diving segment grew by 93%. The diving segment was the worst hit by the pandemic due to the shutdown of air travel but is coming back strongly.
Moving down the report the company gives some more good news, the gross margins improved slightly to 45.7% due to cost leverage. The company reports rising price pressures but says cost leverage more than offset the difference. As for earnings, the company reports $2.83 in GAAP earnings to beat the consensus by $0.33 and grow more than 100% from last year. The strong cash flow helped drive the company's cash position to a 37% year-to-date Improvement as well as a 25% increase in shareholder equity. Johnson Outdoor Brands has no debt on its balance sheet.
Johnson Outdoor Brands Gives Favorable Outlook
Johnson Outdoor Brands does not give actual guidance but did provide us with some commentary that paints a positive picture for the Q4 period. Not only does the company characterize current demand as strong but also the outlook for demand going into the fourth quarter. The only negative that we can turn up in this report is that global supply chain issues are causing some problems but, at least for now, those are being mitigated.
“At this time, our focus is to manage dynamic supply chain issues caused by the COVID-19 pandemic in order to meet strong demand heading into the end of the fiscal year,” said David W. Johnson, Chief Financial Officer. “Our balance sheet and healthy cash position continue to enable us to invest in strategic opportunities to strengthen the business, while consistently paying dividends to shareholders.”
The Technical Outlook: Johnson Outdoor Brands Wants To Move Higher
Shares of Johnson Outdoor Brands appear to be putting in a bottom but there is some risk. The Q3 report has price action moving higher in early trading but resistance appears to be present at the $120 level. If this resistance is confirmed the stock could be in for another major sell-off. The key support level is at $110, if that level breaks down the door is opened for a move to $100 or lower. If however, the market is able to regain its footing and move above the $120 level we see the stock moving back up to the $140 level and possibly as high as $150 by the end of the year.
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