On Monday, the Smith & Wesson Holding Corporation (Nasdaq:SWHC) announced fourth-quarter earnings for fiscal 2009. The 157-year-old firearms maker has been an American institution, spanning three centuries, however, analysts are torn on what the future holds for this gunslinger.
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Following the closing of the markets on Monday, SWHC held a conference call to announce its Q4 earnings for their fiscal 2009, and the numbers did not disappoint. The Springfield, Mass. firearms manufacturer reported a net profit of $7.4 million, or 14 cents per share, more than doubling Q4 earnings from last year and beating analysts estimates, which pegged earnings at 12 cents.
SWHC also saw sales of its guns increase 20%, to $99.5 million. The company did, however, report that it expects its order backlog to decrease substantially in the coming quarter, continuing a trend that saw growth decline to 15% in May compared to over 30% in April. Also, for the full year, the company lost $64.2 million, or $1.37 per share, compared to a $9.1 million (22 cents per share) profit in fiscal 2008. Investors reacted immediately by sending shares down 5% in after hours trading, and SWHC was trading down over 8% at the trade break Tuesday.
Smith & Wesson's announcements provided fuel to the fire of both bulls and bears of the company. Some analysts see the increase in quarterly profits as an indication of the growth potential of the company, pointing to the strength of the Smith & Wesson brand to open doors into other segments of the firearms industry, such as shotguns and hunting rifles. An entry into these markets could prove very profitable for a company that has been the household name in handguns for over 150 years.
Other analysts see the outlook for Q1 as the beginning of a trend for SWHC, which could see the company suffer a great deal in the wake of an improving economy. Many believe that SWHC's strong sales in the past few months have been a direct result of fear revolving around the future of the economy and country as a whole. Not to mention President Obama's stance on increasing gun control, the window for SWHC and competitor Sturm, Ruger & Company (NYSE:RGR) is closing fast. The next year could be a make or break year for this company (and many analysts are betting on the latter).
The Bottom Line
The Smith & Wesson Holding Company has seen every kind of market imaginable since its inception over 150 years ago, but this new economy may be the one that puts a bullet in the firearms manufacturer. (To read more, see Free Markets: What's The Cost?)