Shares of Springfield, Mass.-based Smith & Wesson (NASDAQ:AOBC) surged in after-hours trading Tuesday after the company announced fiscal Q2 2014 financial results that beat expectations for both sales and earnings.
Sales for the fiscal second quarter increased only 2% in comparison to last year's Q2, but at $139.3 million, still beat the Street's anticipated $137.5 million in Q2 sales. Profits per diluted share came in at $0.28, down 10% from last year but still better than the expected $0.21. Share buybacks cut the firm's diluted share count by nearly 10%, helping to bolster per-share profits.
Smith & Wesson expanded its gross margin significantly in Q2, with gross profits totaling 41.6% of net sales -- an increase of 610 basis points from last year. Operating costs soared, however, eating into those gains and resulting in an operating profit margin of only 20.7% -- just a gain of 120 basis points from last year.
High levels of capital spending similarly ate up all of S&W's operating cash flow for the quarter, leaving the company with negative free cash flow of $9.1 million. Nevertheless, CEO James Debney characterized the quarter as a "continued successful execution of our growth strategy."
Investors appear to agree. Smith & Wesson shares shot up more than 5% in after-hours trading, and are still holding onto those gains.
Fool contributor Rich Smith and The Motley Fool have no position in any stocks mentioned. 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.