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Why American Outdoor Brands Stock Just Popped 16%

By Rich Smith – Dec 7, 2018 at 12:12PM

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The former Smith & Wesson just thumped analyst estimates soundly.

What happened

Shares of gunsmith American Outdoor Brands (SWBI 0.88%) -- the rebranded Smith & Wesson -- went off like a shot this morning and are soaring 16% above their Thursday close as of 11:50 AM EST.

The reason: Earnings came in much stronger than expected last night, with American Outdoor Brands reporting pro forma profits of $0.20 per share for its fiscal second quarter 2019 -- versus the $0.13 per share Wall Street had expected .

Gold revolver

American Outdoor Brands' earnings are golden this morning. Image source: Getty Images.

So what

Granted, actual generally accepted accounting principles (GAAP) profits for the quarter were only $0.12 per share. But even so, this was twice what American Outdoor Brands earned in last year's Q2.

Sales increased 9% to $161.7 million, gross margins grew 70 basis points year over year, and operating margins expanded by 160 basis points to 7%, helping to magnify the effect of the sales growth down on the bottom line.

Now what

Management also updated its guidance for the fiscal third quarter 2019 already underway and for the full fiscal year as a whole. For Q3, American Outdoor Brands expects to earn between $0.01 and $0.05 per share (GAAP) on sales of from $155 million to $165 million. For the year, earnings could range from $0.38 to $0.42 per share ($0.69 to $0.73 pro forma) on sales of from $625 million to $635 million.

For comparison, Wall Street is currently expecting full-year sales to come in just below $625 million. Street estimates, which are usually given pro forma, call for just $0.64 per share in earnings. Thus, by all indications, American Outdoor Brands isn't planning to just beat estimates this quarter -- but to beat them all year long, and with a stick.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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