Please ensure Javascript is enabled for purposes of website accessibility

Why Smith & Wesson Stock Crashed Today

By Rich Smith – Sep 2, 2021 at 3:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This isn't how earnings beats normally work.

What happened

Shares of gunsmith Smith & Wesson Brands (SWBI -2.16%) swooned 11.7% as of 1:40 p.m. EDT Thursday, despite beating earnings projections in last night's fiscal first-quarter report.

Instead of the $1.29 per share Wall Street analysts had forecast, Smith & Wesson earned $1.57.  

Glowing red stock chart arrow trending down

Image source: Getty Images.

So what

Those earnings, by the way, were more than twice the $0.77 per share that Smith & Wesson earned in the year-ago quarter.

Smith & Wesson also reported "record Q1 net sales" for the quarter, up 19.5% year over year to $274.6 million, which in combination with a monster 710 basis point increase in gross profit margin on those sales resulted in the huge net profit on the bottom line. Nonetheless, the sales number was less than Wall Street had hoped to see -- $278.6 million.

Presumably, it was this weakness in sales that disappointed investors today.

Now what

But what about tomorrow?

Honestly, I have to say that the future looks pretty bright for Smith & Wesson. CEO Mark Smith pointed out that Smith & Wesson "has been able to deliver nearly 170% two-year compounded growth, significantly outpacing the competition, while simultaneously lowering operating costs over this same timeframe" (emphasis his). Looking ahead, he sees only more of the same, describing the company as "well positioned for the ever-changing market conditions in our industry, to maintain our leadership position in the industry, and continue delivering impressive profitability in any environment."

Granted, management didn't give any specific guidance on what to expect in terms of sales and earnings going forward. Granted, too, analysts are forecasting a decline in profitability from Q1 levels in the coming quarter.

Then again, they were wrong about the first quarter. Who's to say they won't be wrong about the second quarter as well?

 

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.

Stocks Mentioned

Smith & Wesson Brands Stock Quote
Smith & Wesson Brands
SWBI
$11.80 (-2.16%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.