Smith & Wesson Earnings Preview: Is Gun Boom Over?

Smith & Wesson (SWHC) is expected to report lower second-quarter sales and earnings late Tuesday.
The No. 2 U.S. firearms maker by revenue, behind Sturm Ruger (RGR), has reported declining earnings per share growth for the past four quarters. Revenue growth has shrunk for three straight quarters.
Consensus is for fiscal second-quarter EPS to fall 13% to 21 cents, and revenue to dip 1% to $137.52 million, from $136.56 million a year ago.

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When Smith & Wesson reported Q1 earnings on Sept. 5, the company forecast Q2 sales of $135 million to $140 million, well below the $143 million then-consensus of analysts polled by Thomson Reuters.
Chief Financial Officer Jeffrey Buchanan said at the time that one reason was fewer production days.
“Specifically, production days in Q2 will be approximately 50,” Buchanan said. As a comparison, there were 63 production days the prior quarter and the company expects more days in Q3 and Q4 than last quarter.
Smith & Wesson’s stock had held up well until recently on growing gun sales, partly due to more states legalizing carrying firearms. And consumers have reacted to calls for stricter gun controls — after tragedies such as the Sandy Hook Elementary School shootings in December 2012 — by buying more guns.
Smith & Wesson rose 2% to 12.21 on the stock market Friday, the highest in nearly four months. The stock rose 3% on Thursday after Lake Street Capital Markets upgraded it to buy from hold, with a price target of 17.
Sturm Ruger, which is on the IBD 50 list of top-rated stocks, reported another solid quarter of growth in early November. Its Q3 profit rose 64% as sales jumped 45% to $170.9 million. Over the past three quarters, year-over-year profit growth has ranged from 52% to 79%.
As a result, its stock hit a fresh all-time high 80.28 on Nov. 21, up 77% for the year, before consolidating. Sturm Ruger fell 1% Friday.


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