Why Smith & Wesson Shares Barreled Lower

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of gun manufacturer Smith & Wesson (NASDAQ: SWHC  ) shot lower by as much as 10%, following the release of its second-quarter earnings results.

So what: Smith & Wesson used the uncertainties of the potential for tighter gun controls to help drive sales for the second quarter up 48%, to $136.6 million, as net income leapt to $0.24, from $0.01 in the year-ago period. Furthermore, Smith & Wesson upped its upcoming quarterly EPS guidance to a range of $0.19-$0.21 versus Wall Street's expectation of just $0.16. Conversely, the company's backlog shrank considerably, to $333 million, down from $392 million just last quarter, which could signify that a slowdown in orders may be on the horizon.

Now what: Both Smith & Wesson and its prime rival Sturm, Ruger (NYSE: RGR  ) tend to benefit every time an election rolls around, because the uncertainty of gun control gets debated in ritualistic fashion. In similar déjà vu fashion, both companies' orders tend to taper off shortly after the elections are over, as investors realize that they've bid shares up far beyond the gun makers' potential. While I'm not overly pessimistic on Smith & Wesson, I'm not overly eager to jump into the stock here, even after today's nearly 10% tumble. For now, I'm perfectly happy being an innocent bystander and waiting on the sidelines, while keeping my eye closely on that backlog figure.

Craving more input? Start by adding Smith & Wesson to your free and personalized Watchlist, so you can keep up on the latest news with the company.


Read/Post Comments (2) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 08, 2012, at 2:49 PM, Beatemup wrote:

    Those folks who are predicting the future based on the change in backordered product in one quarter are going to be surprised.

  • Report this Comment On December 10, 2012, at 2:24 PM, 6sigmaford wrote:

    Agreed - I may have bit way early, but I bought a small piece of the company. Forward estimates looked interesting. Any Congressional discussion will drive the faithful to the stores for arms or ammo.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2145061, ~/Articles/ArticleHandler.aspx, 9/17/2014 5:30:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 17,131.97 100.83 0.59%
S&P 500 1,998.98 14.85 0.75%
NASD 4,552.76 33.86 0.75%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/16/2014 4:05 PM
RGR $50.05 Down -1.14 -2.23%
Sturm, Ruger & Com… CAPS Rating: ****
SWHC $10.10 Down -0.17 -1.66%
Smith & Wesson Hol… CAPS Rating: ***

Advertisement