Going into Smith & Wesson Holding Corp.'s (NASDAQ:SWHC) fiscal third-quarter report yesterday evening, investors were understandably on the edge of their seats.

After all, shares of competitor Sturm, Ruger (NYSE:RGR) plunged as much as 11% last Wednesday when its own quarterly results missed expectations. Ruger's subsequent conference call was also punctuated by the insistence of CEO Michael Fifer that orders now appear more "realistic and shippable" -- at least compared with the oversize, impossible-to-fill shipments demanded by dealers and distributors in the same year-ago period.

But that "problem" currently doesn't seem to extend to Smith & Wesson, whose shares rose more than 18% this morning after it reported quarterly sales that grew 7.1% year over year to $145.9 million. That translated to 34.6% growth in net income from continuing operations to $0.35 per diluted share, and total net income of $0.36 per diluted share.

By contrast, analysts only expected earnings of $0.29 per share on sales of $142.7 million.

Also of note: Smith & Wesson's overall revenue would have risen 16.7% excluding Walther product sales sold in last year's fiscal Q3 under a since-ended distribution agreement. Handgun sales fared even better, growing 29.9% over last year's strong quarter on continued strong demand for its popular Polymer M&P pistols.


Smith & Wesson's Popular M&P SHIELD .40 Handgun. Photo: Smith & Wesson.

This also offers a favorable comparison to adjusted NICS background checks -- a reasonable benchmark to gauge overall domestic consumer firearms sales -- which fell by 32% over the same period.

Perhaps best of all, Smith & Wesson expects fiscal fourth-quarter sales to be between $159 million and $164 million, with earnings per share from continuing operations between $0.37 and $0.40. As a result, it also raised its full-year fiscal 2014 guidance, calling for sales between $615 million and $620 million and earnings per share on the same basis between $1.39 and $1.42.  

Analysts, on average, were looking for fiscal 2014 earnings of only $1.35 per share on sales of $617.49 million.

With shares of Smith & Wesson currently trading at just 10 times next year's estimated earnings, for once I find myself agreeing with no less than two analysts who upgraded the stock this morning: the first from Cowen Group, which boosted shares to outperform from market perform, and the second from Sidoti, which boosted its price target by 21% to $23 per share.

In any case, while the broader gun boom is definitely waning as we've long suspected it should, investors can take solace knowing Smith & Wesson is emerging a stronger industry force than ever before.

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Steve Symington has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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