Smith & Wesson (SWHC) Plunges On Assault Rifle Ban Fears
Shares of gun manufacturer Smith & Wesson (SWHC: Analysis) plunged this week, despite reporting third quarter earnings that surprisingly more than tripled from the prior year quarter. The Springfield, Massachusetts-based company posted a profit of 26 cents per share, or $14.6 million, a 228% increase from the prior year quarter.
Revenue rose 38.8% to $136.2 million. Thomson Reuters analysts expected the company to earn 23 cents per share on revenue of $134 million. Daily Chart
Americans apparently purchased more firearms in anticipation of stricter gun laws from lawmakers across America. The company's industry peer Sturm Ruger (RGR
) also posted similarly strong quarterly earnings last week. CEO James Debney acknowledged that the quarter's strong results were attributed to "continued robust consumer demand for firearms", and highlighted the company's strong sales of military & police pistols as well as "modern sporting rifles". Debney also addressed the Sandy Hook tragedy, stating that his employees "were shocked and deeply saddened by the tragedy at Sandy Hook." However, he stated that the gun industry was a "part of important national discussion about how to cope with violence in our communities." He also remained steadfast in his stance, stating, "We will remain strong supporters of and defenders of the Constitution and the Second Amendment." The quarter was one filled with controversy, as the mass shooting at Sandy Brook Elementary School, which left 20 children and 8 adults dead last December, thrust demand for stricter gun laws into the national spotlight. President Obama has made stricter gun regulation a top priority for his second term in office. A ban on assault rifles with high-capacity magazines could be renewed. Wedbush securities Rommel Dionisio stated that a ban on assault rifles would impact Smith & Wesson's earnings by up to 40 cents per share for the year. Military & Police tactical rifles would immediately be banned, which currently generate 20% of Smith & Wesson's annual sales. A ban on high capacity magazines would also "severely hamper" sales of several of the company's pistols, stated Dionisio. Smith & Wesson forecasts earnings of 38 to 40 cents per share for the current quarter, and up to $1.19 per share for the full year. Both estimates top analyst forecasts for 30 cents per share for the quarter and $1.06 for the year. The company also raised its earnings guidance for 2013. The company now expects total revenue to come in between $575 to $580 million, exceeding the average analyst estimate of $561 million. However, some analysts believe that the surge in gun purchases may have peaked. The number of FBI background checks required for gun permits only rose 29% in February, compared to a 94% and 58% increase over the last two months. However, Cowen and Company analyst Cai von Rumohr noted that the decline in background checks may have resulted from demand outstripping supply at retailers. Shares of Smith & Wesson trade at 9.7 times forward earnings with a 5-year PEG ratio of 0.32. The stock does not pay a dividend. Other News About SWHC Smith & Wesson Earnings Triple In Latest Quarter As Consumers Scramble To Buy Guns
Smith & Wesson plunges despite a huge surge in earnings. Smith & Wesson Raises Outlook as Gun Sales Soar
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Published on Mar 7, 2013
By Leo Sun