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Smith & Wesson Eases, Analysts Divided After Report

Smith & Wesson eased even after the gun manufacturer reported profit jumped and sales doubled. Analysts are mixed in their opinions.

Shares of Smith & Wesson  (SWBI)  traded lower even after the gun manufacturer reported fiscal-third-quarter profit jumped and sales doubled. 

Analysts are mixed in their opinions.

The Springfield, Mass., company's shares at last check dropped 0.6% to $15.70.

For the quarter ended Jan. 31 Smith & Wesson reported earnings of $1.12 a share, compared with 8 cents a share in the year-earlier period.

Adjusted earnings increased seven-fold to $1.12 a share from 14 cents a share in the year-ago period.

Revenue more than doubled to $257.6 million from $127.4 million.

A survey of analysts by FactSet produced consensus estimates of GAAP earnings of 72 cents a share, or an adjusted 81 cents a share, on revenue of $236.7 million.

Smith & Wesson generated $60 million of cash from operations during the quarter, Executive Vice President and Chief Financial Officer Deana McPherson said in a statement. 

"This allowed us to complete a $50 million share-repurchase program, pay our second-quarter dividend, and continue to invest in capital, all while growing our cash on hand by $4.1 million during the quarter."

Wall Street analysts were divided in their outlook.

CL King’s analyst Scott Stember wrote that Smith & Wesson saw a continued demand surge, with a “record number of new people (including women and different ethnicities) still entering the gun market.”

However, Stember, who maintains a neutral rating on the stock, also noted that “the sharp sequential deceleration in gun demand in February has us incrementally more concerned about a potential industry correction.” 

That's "especially with management attributing some of the slowdown on a “pullback in politically-motivated panic buying.”

The largest U.S. gun manufacturer also authorized a new $100 million share-buyback program. 

Cowen analyst Cai Von Rumohr wrote that the quarter was “broadly robust, and evidence suggests demand is holding better than slowing February NICS [government background checks] suggest.” The analyst rates the stock outperform.

And Craig-Hallum downgraded Smith & Wesson stock to hold from buy, even as analyst Steven Dyer said the company had "robust" quarterly sales.

“We expect this strength to continue for the next few quarters ... as demand remains elevated and the channel needs to be restocked. But we are starting to see signs of modest demand softening,” Dyer wrote.