Why Smith & Wesson Holding Corp. Shot Higher

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 maker Smith & Wesson Holding Corp.  (NASDAQ: SWHC  ) soared 18% today after its quarterly results and outlook topped Wall Street expectations.

So what: The stock had pulled back sharply in 2014 on concerns over weakening firearm demand, but today's Q3 beat -- EPS of $0.36 on revenue of $145.9 million versus the consensus of $0.29 and $142.5 million -- coupled with upbeat guidance is quickly easing those worries. In fact, gross margins expanded 360 basis points over the year-ago period, giving analysts plenty of good vibes over Smith & Wesson's competitive position as well.

Now what: Management now sees full-year EPS of $1.39-$1.42 from continuing operations on revenue of $615 million-$620 million, versus Wall Street's view of $1.33 and $617.5 million. "We believe that our long-standing approach of growing our business through the addition of flexible capacity has positioned us well to adapt to our dynamic environment," President and CEO James Debney said. "Overall, our balance sheet remains flexible and strong with no borrowings under our credit facility." Given today's massive near-20% pop, however, waiting for some of Mr. Market's excitement to fade seems prudent. 

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