Springfield, MA-based manufacturer of firearms, Smith & Wesson Holding Corporation (SWHC) raised its guidance for both the third quarter of fiscal 2015 (ending Jan 31, 2015) and fiscal 2015 (ending April 30, 2015). Following the announcement, Smith & Wesson’s stock surged 16.5% to close the trading session on Tuesday at $11.67.
Positive trends in the firearms market and the company’s recent purchase of Battenfeld Technologies Inc. are the primary reasons for the upward revision. Smith & Wesson completed the acquisition of Columbia, MO-based leading provider of hunting and shooting accessories, Battenfeld Technologies, on Dec 11, 2014. The revised guidance includes the effect of this acquisition as well. (Read: Smith & Wesson to Buy Firearm Accessories Firm Battenfeld)
Revised Outlook
For the third quarter of fiscal 2015, the company has raised the low end of its earnings guidance range. The new guidance range is 10–11 cents, up from the previous guidance of 9–11 cents. The company also upped its revenue guidance for the quarter to the range of $124–$126 million from the previous forecast of $113–$118 million.
Moreover, the company hiked its earnings guidance for fiscal 2015 to the range of 68–72 cents from the previous guidance of 66–70 cents. It also boosted its revenue expectations to the range of $526–$530 million from the previous expectation of $504–$508 million.
Our Take
Since the re-election of President Obama in 2012, the company witnessed higher sales on fear of tighter regulation for weapons. A series of unfortunate shooting incidents in the past – the Boston Marathon terror attack on Apr 15, 2013 and the tragic shootout at the Sandy Hook Elementary School Newtown, CT on Dec 14, 2012 – had sparked fierce controversy concerning proliferation of firearms.
However, Obama failed to clear the bill through the Congress that could have restricted purchase and ownership of guns. Thus, without the threat of gun sales restrictions, the earlier rush to possess firearms ebbed to a large extent. This was reflected not only by the sales decline in previous quarters but also in the soft sales guidance for fiscal 2015.
And yet the company is expected to gain immense traction from the Battenfeld acquisition. It will enable the company to expand in the firearm accessories market and the hunting vertical as well, thus boosting its sales. Battenfeld boasts of a solid distribution network and is well renowned for producing high-quality products. Smith & Wesson will likely witness a boost in its sales as it leverages Battenfeld’s potentials.
This Zacks Rank #3 (Hold) company has a decent earnings history. It beat estimates in the last four quarters, delivering an average positive surprise of 15.82%.
Smith & Wesson is slated to report its third-quarter fiscal 2015 results on Mar 3, 2015.
Upcoming Peer Releases
Brunswick Corporation (BC) is expected to release its results for the fourth quarter 2014 on Jan 29, 2015. The Zacks Consensus Estimate stands at 26 cents.
Sturm, Ruger & Co. Inc. (RGR) is expected to release its results for the fourth quarter 2014 on Feb 24, 2015. The Zacks Consensus Estimate stands at 47 cents.
Black Diamond, Inc. (BDE) is expected to release its results for the fourth quarter 2014 on Mar 2, 2015. The Zacks Consensus Estimate stands at 10 cents.
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