Why Smith & Wesson Holding Corp Shares Were Decimated Today

Is this meaningful? Or just another movement?

Aug 27, 2014 at 2:15PM

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 Smith & Wesson Holding (NASDAQ:SWHC) have lost about 13% of their value Wednesday after the company released fiscal first-quarter earnings that contained guidance far below what Wall Street had expected.

So what: Smith & Wesson's first quarter produced $131.9 million in revenue and $0.26 in earnings per share. Both results were well below the year-ago quarter's results -- revenue was 23% weaker and EPS fell 35% year over year -- and the top line missed analyst expectations of $134 million, but the company's bottom line beat estimates by a penny. However, Smith & Wesson now expects to earn only $0.89-$0.94 per share for the full fiscal year on a revenue range of $530 million-$540 million. Both guidance ranges are far lower than earlier guidance, which anticipated full-year EPS in the $1.30-$1.40 range on $585 million-$600 million in revenue.

Now what: This has not been a good year for publicly traded gun-makers, as a years-long frenzy of gun buying appears to have temporarily ebbed following President Obama's failed efforts to implement new firearms restrictions. This was the second consecutive quarter of year-over-year revenue declines for Smith & Wesson, something which last occurred in late 2010 after gun-friendly politicians were swept into the House of Representatives.

Firearms manufacturers have gone through such ebbs and flows before. The good news for Smith & Wesson and its peers is that the FBI's records of monthly background checks for firearm sales show year-over-year growth in background checks of 8% and 9% for June and July, respectively, after far fewer background checks were conducted in January and February than were conducted a year earlier. While this higher number of background checks may not result in a return to strong growth, it at least indicates that Americans are still interested in firearms ownership, and that's a long-term positive for Smith & Wesson.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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