Please ensure Javascript is enabled for purposes of website accessibility

Why Smith & Wesson Holding Corp. Stock Popped Today

By Steve Symington - Jan 5, 2016 at 12:00PM

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

The gun maker increased its quarterly and full-year guidance. Here's what investors need to know.

What: Shares of Smith & Wesson Holding Corp. (SWBI -1.03%) were up 11.9% as of 11:15 a.m. Tuesday after the firearms manufacturer increased guidance for its fiscal third-quarter and full fiscal-year 2016.

So what: Crediting stronger-than expected sell-through rates of products at distribution, Smith & Wesson has seen reduced distributor inventories of its firearms. In addition, adjusted December data from the National Instant Criminal Background Check System (NICS) showed "strong" year-over-year growth in consumer firearms purchases.

As a result, Smith & Wesson now expects fiscal third-quarter revenue in the range of $175 million to $180 million, which should translate to adjusted earnings per diluted share of $0.39 to $0.41. For perspective, Smith & Wesson's initial guidance last month called for Q3 revenue of $150 million to $155 million and adjusted earnings per share of $0.27 to $0.29. Analysts, on average, were modeling earnings of $0.28 per share on revenue near the high end of Smith & Wesson's previous range.

For the full fiscal-year 2016, Smith & Wesson anticipates revenue of $650 million to $660 million and adjusted earnings per diluted share of $1.36 to $1.41. Both ranges represent significant increases from previous guidance, which called for revenue of $625 million to $635 million and earnings per share of $1.26 to $1.31. Wall Street, for its part, was looking for adjusted earnings of $1.32 per share on revenue of $636.5 million.

Now what: On one hand, previous consensus estimates clearly show that Wall Street anticipated Smith & Wesson to outperform its old guidance, especially given a spark provided by consumers' fears of tougher gun legislation down the road. But the gravity of the outperformance reflected in Smith & Wesson's new ranges does come as a surprise. And it's particularly encouraging that the company is seeing such strength so early after its most recent quarterly report less than a month ago.

Of course, it remains to be seen just how long this elevated demand will last. But for now, I can't blame investors for so aggressively bidding up Smith & Wesson stock today.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Smith & Wesson Brands, Inc. Stock Quote
Smith & Wesson Brands, Inc.
SWBI
$15.35 (-1.03%) $0.16

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
402%
 
S&P 500 Returns
129%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

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