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AXIL Brands, Inc.’s AXIL fiscal 2024 earnings results reflect the impacts of the complexities of rapid growth and rising costs. While the year showcased substantial revenue gains and notable improvements in earnings per share, the challenges of scaling (particularly through increased branding, marketing and operational expenses) have started to weigh on profitability. As AXIL continues to expand its market presence, investors are faced with a mixed outlook, wherein robust top-line growth is tempered by tightening margins and pressures on cash flow.
AXIL Brands, Inc. Price, Consensus and EPS Surprise
AXIL Brands, Inc. price-consensus-eps-surprise-chart | AXIL Brands, Inc. Quote
Fiscal 2024 Results
AXIL Brands reported fiscal 2024 earnings per share of 21 cents, increasing from 10 cents a year ago.
For fiscal 2024, AXIL Brands reported year-over-year net sales growth of 17%, reaching $27.5 million from $23.5 million in the prior year.
This growth was primarily driven by enhanced marketing and sales initiatives within the hearing protection and enhancement segment, which accounted for approximately 95% of total revenues.
Key Business Metrics
AXIL Brands' fiscal 2024 financial results highlight its ongoing efforts to scale its operations, while grappling with rising expenses. The significant year-over-year increase in sales demonstrates the effectiveness of the company's strategic initiatives, particularly in expanding distribution and retail channels. However, sharp rises in the cost of sales and operating expenses compressed margins, signaling potential challenges ahead.
Consequently, gross profit increased year over year to $20.2 million from $17.7 million, though the gross margin narrowed slightly to 73.4% from 75.3% primarily due to expansion costs into new retail and distribution channels.
Despite these higher costs, AXIL Brands achieved a net income of $2 million, an improvement from $1.8 million a year earlier. The net income available to common shareholders was significantly bolstered to $3.3 million due to a gain on the redemption of preferred shares.
The company maintained a solid operating income of $1.5 million, though this was a decrease from $2 million in the prior year. The net profit margin stood at 7.3%, slightly lower than the 7.8% reported in the prior year.
Additionally, the return on equity was robust, supported by the increase in net income available to common shareholders, reflecting the company’s strategic efforts to optimize its capital structure.
Costs
Despite impressive revenue growth, the cost of sales rose 26% to $7.3 million from $5.8 million in fiscal 2023. This escalation in costs was due to the increased expenses associated with branding and marketing efforts, which, while boosting sales, also heightened cost pressures.
The company's operating expenses increased 19% year over year to $18.7 million, reflecting higher marketing and selling expenses, increased compensation, and rising general and administrative costs.
Cash & Debt
Cash flow also showed some strain, with net cash provided by operating activities dwindling to just $2,677 from the $2.9 million generated in the prior year. This decline in cash flow underscores the impacts of increased costs on the company's liquidity.
On the balance sheet, cash reserves decreased year over year to $3.25 million from $4.83 million, reflecting the company's ongoing investments and the repurchase of preferred stock.
AXIL's total liabilities also declined slightly to $3.28 million from $3.5 million in fiscal 2023, indicating some level of financial discipline amid rising expenses.
Management View
Management commentary suggests a continued focus on expanding global presence and strategic partnerships, with an emphasis on optimizing existing relationships and establishing new ones. The company’s strategic initiatives are geared toward driving sustainable growth and maximizing potential in dynamic markets.
Other Developments
The most notable development in the year was the significant reduction in weighted average outstanding shares on a fully diluted basis, which dropped 49% to 8.3 million shares as of Aug 13, 2024. This reduction was largely caused by the redemption of preferred shares, which contributed to the increase in net income available to common shareholders.
AXIL Brands' results in fiscal 2024 showcase a company in growth mode but facing the inevitable pressures of scaling. Investors should weigh the benefits of the company’s revenue growth against the challenges posed by rising costs and margin compression. The reduction in share count and the focus on international expansion are positive signs, but the pressure on profitability is concerning as the company continues its aggressive growth strategy.
Zacks Investment Research
Tuesday, August 6, 2024
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Berkshire Hathaway Inc. (BRK.B), Tesla, Inc. and Visa Inc. , as well a micro-cap stock AXIL Brands, Inc. . The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.
These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Berkshire Hathaway’s shares have modestly outperformed the Zacks Insurance - Property and Casualty industry over the year-to-date period (+16.5% vs. +15.4%). The company is one of the largest property and casualty insurance companies with numerous diverse business activities. A strong cash position supports earnings-accretive bolt-on buyouts and is indicative of its financial flexibility.
Continued insurance business growth fuels an increase in float, drives earnings and generates maximum return on equity. The non-insurance businesses have also been doing well in the last few years. The addition of Pilot Travel Centers has strengthened its energy business. A sturdy capital level provides further impetus.
However, exposure to cat loss induces earnings volatility and also affects underwriting results. Huge capital expenditure remains a headwind. With the demise of Charles Munger, uncertainty looms over the company's performance.
(You can read the full research report on Berkshire Hathaway here >>>)
Shares of Tesla have modestly outperformed the Zacks Automotive - Domestic industry over the past six months (+4.9% vs. +2.0%). The company has been plagued by shrinking automotive margins amid aggressive price cuts and discounts. The company expects its vehicle volume growth rate for 2024 to be noticeably lower than 2023 amid a cooling electric vehicle market.
With competition intensifying in the EV space, Tesla’s focus on autonomous driving and artificial intelligence is expected to be a game changer. It aims to launch affordable vehicles, transition into an AI company and is banking on its robotaxi venture.
The expected rollout of Tesla-supervised Full Self Driving (FSD) software in China and Europe by the end of the year will boost prospects. Additionally, TSLA’s Energy Generation and Storage business is thriving. While near-term challenges persist, long-term prospects appear promising, driven by its big bet on driverless software and AI.
(You can read the full research report on Tesla here >>>)
Visa shares have gained +6.8% over the past year against the Zacks Financial Transaction Services industry’s gain of +8.3%. The company’s strategic acquisitions and alliances are fostering long-term growth and consistently driving its revenues.
Visa, fueled by persistent increase in payments, cross-border volumes and sustained investments in technology, is witnessing significant profit growth. The ongoing shift to digital payments is advantageous for Visa, with strong domestic volumes supporting its overall performance. A robust cash position enables the company to enhance shareholder value.
However, elevated operating expenses pose margin challenges. We expect adjusted operating expenses to jump 10.1% in fiscal 2024. It is witnessing a volatile cash volume from the Asia Pacific and CEMEA regions. Moreover, rising client incentives will affect its adjusted revenues.
(You can read the full research report on Visa here >>>)
Shares of AXIL Brands’ have underperformed the Zacks Consumer Products - Staples industry over the past year (-61.6% vs. -12.0%). This microcap company with market capitalization of $27.98 million is witnessing rising operating expenses and declining gross profit margins signal profitability challenges. Inventory management issues and high customer concentration risks add to the concerns.
Increased accounts payable and reduced cash flow from operating activities highlight cash flow volatility. As such, the stock warrants a cautious stance. Nevertheless, AXIL is expanding globally, diversifying revenue streams across the United States, Canada, the EU and Asia.
Strategic initiatives, such as the NASCAR-branded hearing protection product deal with Racing Electronics and a distribution agreement with Kinsey’s, boost market penetration. The strategic share repurchases in March 2024, reducing outstanding shares by 55%, enhance shareholder value. Third-quarter fiscal 2024 revenue growth of 14.4% shows effective sales strategies and business expansion.
(You can read the full research report on AXIL Brands here >>>)
Other noteworthy reports we are featuring today include Morgan Stanley , The Southern Company and Cognizant Technology Solutions Corporation .
Director of Research
Sheraz Mian
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>
Today's Must Read
Solid Insurance Business Aid Berkshire (BRK.B), Cat Loss Ail
Big Bets on AV and AI to Drive Tesla's Prospects
Visa Rides on Increasing Payments Volume, Expenses High
Featured Reports
Expansion Efforts Aid Morgan Stanley , High Costs a Woe
Per the Zacks analyst, high rates, strategic alliances and Morgan Stanley's focus on less capital-markets dependent operations will aid financials amid tough operating backdrop and rising expenses.
Southern Company Buoyed by Regulated Customer Growth
The Zacks analyst believes that the growth in Southern's regulated business customer base will drive revenue growth. But the company's high leverage restricts its financial flexibility.
Cognizant Rides on Acquisitions, Strong Partner Base
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ANSYS' Performance Driven by Robust Product Portfolio
Per the Zacks Analyst, higher demand for simulation solutions across verticals like aerospace and high tech is driving ANSYS's performance. Increasing expenses and stiff competition are concerning.
Clean Assets, North America Focus Aid Clearway Energy
Per the Zacks analyst, Clearway Energy is expected to gain from its expanding modern clean renewable projects and focus on North America, saves it from currency fluctuation and sovereign risks.
Crysvita & Dojolvi Drive Ultragenyx , Setbacks a Woe
Per the Zacks Analyst, Ultragenyx's marketed products have been witnessing strong growth year-over-year. However, any pipeline/regulatory setback will hinder the stock's growth potential.
Advanced Energy Rides on Strong Data Center Market
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New Upgrades
Robust Pipeline, Unique Platform Aids Exact Sciences
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Pilgrim's Pride Benefits From Robust U.S. Operations
Per the Zacks analyst, Pilgrim's Pride is gaining from higher sales in the U.S. Operations for a while. During second-quarter 2024 sales in the region increased 8.9% year over year.
Wolverine's Product Initiatives to Boost Market Share
Per the Zacks analyst, Wolverine is actively pursuing a comprehensive strategy to enhance brand portfolio, focusing on Merrell and Saucony brands. These efforts are expected to help gain market share.
New Downgrades
Phillips 66 Battles Reduced Profit Amid High Oil Price
Per the Zacks analysts, Phillips 66's refining margins are hit by rising crude costs and volatile feedstock prices. The company's costly long-term projects and debt exposure add to the concern.
Lower Demand & Rising Debt Levels to Ail CNH Industrial
Per the Zacks analyst, lower demand in the construction and agriculture industries is likely to decelerate CNH Industrial's top-line growth. Rising debt also remains a concern.
Dismal Contract Sales Ail Marriott Vacations Prospects
Per the Zacks analyst, Marriott Vacations operations are likely to be hurt by dismal contract sales and fall in volume per guest. Also, increased expenses are an added concern.
Zacks Investment Research
Thursday, July 25, 2024
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features a real-time scorecard of the Q2 earnings season and updated analyst reports on 16 major stocks, including Netflix , Wells Fargo and Comcast , as well a micro-cap stock AXIL Brands, Inc. . The Zacks microcap research is unique as our research content on these small and under-the-radar companies is the only research of its type in the country.
These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
You can see all of today’s research reports here >>>
Q2 Earnings Season Scorecard
Including all of this morning's reports, we now have Q2 results from 181 S&P 500 members or 36.2% of the index's total membership. Total earnings for these companies are up +6.3% from the same period last year on +4.9% higher revenues, with 79.6% beating EPS estimates and 58% beating revenue estimates.
The +6.3% earnings growth in Q2 for this group of companies compares to +8.3% for these companies in 2024 Q1, +2.1% in 2023 Q4, and +4.2% in 2023 Q3. On the revenues side, trhe +4.9% revenue growth for these 181 index members compares to +4.4% in Q1, +3.4% in 2023 Q4 and +3.9% in Q3.
On the beats side, the 79.6% EPS beats percentage compares to the 20-quarter of 79.9% for this group of 181 index members while the 58% revenue beats percentage compares to 70.1% average over the preceding 20-quarter average.
Looking at Q2 as a whole, cobining the actuals that have come out with estimates for the still-to-come companies, total earnings are expected to be up +9.6% from the same peirod last year on +5.1% higher revenues.
Today's Featured Analyst Reports
Netflix shares have outperformed the Zacks Broadcast Radio and Television industry over the year-to-date period (+28.9% vs. +14.8%). The company added 8.05 million paid subscribers globally in second-quarter 2024, with a rise of 1% in average revenue per subscription. The company attributed the robust top-line growth to its paid subscription-sharing offering (part of its password-sharing crackdown), recent price changes and the strength of its business in general.
Netflix is expected to continue dominating the streaming space, courtesy of its original and diversified content portfolio, which is attributable to heavy investments in the production and distribution of localized and foreign-language content.
However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video, Disney+, Peacock and Paramount+ is a headwind. The company's leveraged balance sheet and a higher streaming obligation are concerns.
(You can read the full research report on Netflix here >>>)
Shares of Wells Fargo have gained +0.6% over the past three months against the Zacks Banks - Major Regional industry’s gain of +7.7%. The company’s second-quarter results reflected lower loan & deposit balances. The company’s loan growth is expected to remain limited, as the asset cap remains in place until it complies fully with regulators’ demands regarding operational risk management.
Similarly, lower originations because of high rates will continue to affect mortgage banking income. However, its progress on efficiency initiatives, such as branch and footprint reduction, will continue to support expense reduction and drive the bottom-line growth.
A decent deposit balance is likely to keep supporting its financials, driven by the strength in the Consumer Banking and Lending segment. With a strong capital position and decent liquid profile, the capital-distribution activities seem sustainable.
(You can read the full research report on Wells Fargo here >>>)
Comcast shares have declined -10.4% over the year-to-date period against the Zacks Cable Television industry’s decline of -15.7%. The company persistently suffers from video-subscriber attrition due to cord-cutting. Moreover, broadband prospects are suffering from increased competition from fixed wireless and fiber businesses. Additionally, a leveraged balance sheet is a major concern.
Nevertheless, Comcast’s second-quarter earnings reflect continued momentum in domestic wireless subscribers and Peacock, offset by a declining broadband subscriber base. The company’s plan to transition to DOCSIS 4.0 is noteworthy. The technology will expand it much faster and at a lower cost compared with its competitors.
Decreasing programming and production costs bode well for Comcast’s profitability. Its streaming service, Peacock, is a key catalyst in driving broadband sales. Strong free cash flow generation ability is noteworthy.
(You can read the full research report on Comcast here >>>)
Shares of AXIL Brands have underperformed the Zacks Consumer Products - Staples industry over the past year (-46.1% vs. -13.3%). This microcap company with market capitalization of $38.04 million is witnessing rising operating expenses and declining gross profit margins signal profitability challenges. Inventory management issues and high customer concentration risks, with three customers accounting for 94% of net sales, add to the concerns. Increased accounts payable and reduced cash flow from operating activities highlight cash flow volatility.
Nevertheless, AXIL is expanding globally, diversifying revenue streams across the United States, Canada, the EU and Asia. Strategic initiatives, such as the NASCAR-branded hearing protection product deal with Racing Electronics and a distribution agreement with Kinsey’s, boost market penetration.
The strategic share repurchases in March 2024, reducing outstanding shares by 55%, enhance shareholder value. Third-quarter fiscal 2024 revenue growth of 14.4% shows effective sales strategies and business expansion.
(You can read the full research report on AXIL Brands here >>>)
Other noteworthy reports we are featuring today include Chevron Corporation , Eaton Corporation plc and HCA Healthcare, Inc. .
Director of Research
Sheraz Mian
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>
Today's Must Read
Netflix Rides on Subscriber Growth, Original Content
Cost Control Aids Wells Fargo Amid Lower Loan Growth
Wireless Subscriber Gain Drives Comcast's Prospects
Featured Reports
Chevron to Gain Guyana Foothold with Hess Buy
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Wide Market Reach, New Product Development Aid Eaton
Per the Zacks analyst Eaton's operations in 175 countries across the world and development of new products through ongoing R&D investments will continue to drive demand and boost profitability.
Solid Adoption of ESG Solution Aids MSCI's Progress
Per the Zacks analyst, MSCI is benefiting from strong demand for custom and factor index modules and the increasing adoption of the ESG and Climate solutions into the investment process.
New Order Growth & Lot acquisitions Aid NVR, High Costs Ail
Per the Zacks analyst, NVR benefits from growth in new orders and a higher average selling price. Also, focus on solid lot acquisition strategy bodes well. However, high costs are a concern.
Quest Diagnostics' Base Revenues Solid, High Debt Ails
Per the Zacks analyst, Quest Diagnostics' base business gains from new customers, improved test mix with advanced diagnostics and ongoing healthcare utilization. Yet, mounting debt poses concern.
Globe Life Continues to Gain From Solid American Income
Per the Zacks analyst, Globe Life is set to grow on solid American Income distribution channel that remains the largest contributor of premium and underwriting margin, which boost revenue growth.
Rezdiffra Approval Boosts Madrigal , Narrow Pipeline a Woe
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New Upgrades
Improving Admissions, Acquisitions Aid HCA Healthcare
Per the Zacks analyst, HCA Healthcare's growing revenues, driven by increasing admissions, have led to significant growth. Strategic acquisitions have helped it expand and remain a driving factor.
Solid Comps Run to Fuel Urban Outfitters' Top Line
Per the Zacks analyst, Urban Outfitters commitment to improve comps, invest in direct-to-consumer business and expand e-commerce sales bode well. Comps rose 4.6% during first- quarter fiscal 2025.
Iridium's Performance Gains from Higher Subscribers
Per the Zacks analyst, Iridium is gaining from higher subscribers, driven by the growing adoption of its services in various sectors. Rising deal wins, especially from the U.S. government are a plus.
New Downgrades
Allegiant Grapples With Rising Expenses, High Debt
The Zacks Analyst is worried about the fact that rising operating expenses are likely to keep ALGT's bottom line under pressure. A debt-laden balance sheet is another concern.
Excess Inventory & Declining Backlog Ail Winnebago
Per the Zacks analyst, Winnebago's excess inventory in the motorhome RV and marine categories may result in pricing pressures. Diminishing order backlog is also concerning.
Lower Prices, High Input Costs Ail Steel Dynamics
Per the Zacks analyst, the company faces margin headwinds from slumping steel prices partly due to a slowdown in end-market demand. It is also exposed to headwinds from elevated steel input costs.
Zacks Investment Research
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