Smith & Wesson Beats on Earnings

Shares of Springfield, Mass.-based Smith & Wesson (NASDAQ: SWHC  ) surged in after-hours trading Tuesday after the company announced fiscal Q2 2014 financial results that beat expectations for both sales and earnings.

Sales for the fiscal second quarter increased only 2% in comparison to last year's Q2, but at $139.3 million, still beat the Street's anticipated $137.5 million in Q2 sales. Profits per diluted share came in at $0.28, down 10% from last year but still better than the expected $0.21. Share buybacks cut the firm's diluted share count by nearly 10%, helping to bolster per-share profits.

Smith & Wesson expanded its gross margin significantly in Q2, with gross profits totaling 41.6% of net sales -- an increase of 610 basis points from last year. Operating costs soared, however, eating into those gains and resulting in an operating profit margin of only 20.7% -- just a gain of 120 basis points from last year.

High levels of capital spending similarly ate up all of S&W's operating cash flow for the quarter, leaving the company with negative free cash flow of $9.1 million. Nevertheless, CEO James Debney characterized the quarter as a "continued successful execution of our growth strategy."

Investors appear to agree. Smith & Wesson shares shot up more than 5% in after-hours trading, and are still holding onto those gains. 


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