Strong Buy on Smith & Wesson - Analyst Blog

By Zacks | January 23, 2013 AAA

On Jan 22, Zacks Investment Research upgraded Smith & Wesson Holding Corporation (SWHC)  to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Consistent performance from this firearm manufacturer and strong second quarter fiscal 2013 results sparked upward earnings estimate revisions. Moreover, the company delivered positive earnings surprises in the last 5 quarters with an average beat of 59.3%. The long-term expected earnings growth rate for this stock is 30.0%.

The firearm manufacturer reported second quarter fiscal 2013 numbers on Dec 6. Non-GAAP earnings per share of 24 cents per share surpassed the Zacks Consensus Estimate by 4.35% and the year-ago figure of 1 cent by a whopping 2300.0%.

The company has seen a steady demand for firearms and a healthy cash balance which allowed the board of directors to approve of a buyback of shares.

Gun sales in the U.S. surged following the unfortunate December shooting in a school at Newtown, CT among fear of stricter gun regulations and rising concern for personal safety.

Smith & Wesson sat on a firearm backlog of $332.7 million, increasing $182.8 million year over year from $149.9 million at the end of the second quarter of fiscal 2012.

The Zacks Consensus Estimate for fiscal 2013 moved higher by 13.04% to $1.04 per share over the last 60 days, which reflects year-over-year growth of 159.5%. The Zacks Consensus Estimate for fiscal 2014 increased 94.1% to 93 cents per share over the same period.

Other Stocks to Consider

The Obama administration has come out with new gun regulations, which are far less strict than initially expected.  Since the new regulations are set to restrict and not destroy the prospects of the future gun industry, shares of  Smith & Wesson, Sturm, Ruger & Co. Inc. (RGR), Cabela's Incorporated (CAB) and Alliant Techsystems Inc. (ATK) moved upwards on the news.

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