Smith & Wesson Reports Record Sales; Stock Slumps On Weak Guidance
Thursday, 1 December 2016
Moments ago, America's legendary gun maker Smith & Wesson reported second quarter earnings which, not surprisingly, beat estimates on the top and bottom line, reporting non-GAAP earnings of $39.1 million, or EPS of $0.68, far above the $0.58 expected, and some 172% higher compared to a year earlier, on revenue of $233.5 million -a 63% increase Y/Y - which beat the high end of the company's own guidance of $230 million, as well as beating street estimates of $227.5 million.
The company's Q2 revenue was the highest recorded in company history.
James Debney, the CEO of SWHC, said, "We are very pleased with our second quarter results, which exceeded our financial guidance. In our Firearms Segment, *we believe higher revenue was driven by strong consumer demand as reflected in adjusted background checks from the National Instant Criminal Background Check System as well as our own market share gains. *In our Outdoor Products & Accessories Segment, we completed the acquisitions of Taylor Brands and Crimson Trace, both of which were accretive to our non-GAAP earnings."
"Subsequent to the end of the quarter, we completed the acquisition of substantially all of the net assets of Ultimate Survival Technologies, Inc. ("UST"), a provider of high-quality survival and camping products. UST delivered compound annual revenue growth of 49% from 2012 through 2015, maintained healthy gross margins, and developed hundreds of high quality products. We believe the UST distribution network will create incremental opportunities for our existing accessory product lines."
For the next quarter, SWHC guided to what would likely be another new all time high in revenue, predicting a sasles range of $230-$240 for the coming quarter (compared to Wall Street estimates of $237.7 million) whose midpoint would make it yet another record revenue quarter for the company history. For the full 2017 year, Smith & Wesson boosted guidance from the previous range of $900-$920 million to $920-$930 million, above the consensus of $910.6 million.
The stock, however, has tumbled after hours, down over 8%, as a result of SWHC's Q3 EPS guidance, which came in the range of $052-$0.57, missing Wall Street estimates of $0.61 cents.
And while there are concerns about the future growth of gun demand now that Hillary Clinton is no longer a potential threat to gun rights, the latest just released FBI data on background checks suggests these are, at least for the time being, courtesy of yet another record high print for the month of November, which rose to 2.561 million, an all time high, a month in which Trump was declared president.
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