Smith & Wesson (Nasdaq: SWHC) Stock Soars on Sensational Quarter and Strong Guidance

With Washington bent on curbing gun and ammunition availability, sales for such items are soaring across the country, as evidenced by a bang-up quarter from Smith & Wesson Holding Corp. (Nasdaq: SWHC).

SWHC stock jumped some 18% intraday Wednesday to $14.27 after reporting better than expected earnings and revenue growth Tuesday after the close.

Driving the robust fiscal third quarter was a 30% growth in handgun sales, which included Smith & Wesson's popular M&P pistols.

Chief Executive Officer James Debney said on a Tuesday conference call that growth in handgun sales was a "very favorable result when we consider the year ago period included a peak in consumer demand."

Here are the numbers that got Wall Street all fired up...

For the quarter ended Jan. 31, the Springfield, Mass.-based firearm manufacturer posted a profit of $20.8 million, or earnings per share (EPS) of $0.36. That was up 43% from the same quarter a year ago when the company earned $0.22 a share and booked a profit of $14.6 million.

Revenue rose a solid 7% to $145.9 million.

The 162-year-old company also raised its fiscal year earnings outlook and projected an earnings per share profit for the current quarter that exceeded analysts' estimates.

For its fourth (current) quarter, Smith & Wesson forecast EPS of $0.37 to $0.40 on revenue of $159 million to $164 million. Analysts had projected EPS of $0.36 and revenue of $165 million.

For the full fiscal year, the company boosted estimates for per-share earnings to $1.39 to $1.42, with revenue coming in between $615 million and $620 million. That's up from previous estimates of $1.30 to $1.35 EPS on net sales of $610 million to $620 million.

The smoking quarter and healthy guidance are especially impressive after the company's recent rough patch.

SWHC: Bouncing Back After a Bumpy Period

Investors fled Smith & Wesson last month after competitor Sturm, Ruger & Co. (NYSE: RGR), the largest publicly traded U.S. firearm maker, reported Q4 earnings that missed estimates for the first time since 2009 and said sales slipped 20% during 2013.

Smith & Wesson shares slumped in sympathy. Beginning February at $13.09, SWHC shares plunged to $9.01 on Feb. 27, following much larger RGR's dismal quarter.

Smith & Wesson has a market cap of $772 million compared to Sturm, Ruger's $1.27 billion. According to company filings, Smith & Wesson has roughly 17% of $2 billion handgun market and a 7% share of the $2.1 billon "long gun" (rifle) market.

Gun Sales Show No Signs of Slowing Down

Overall sales of guns and ammunition have been climbing for the last decade. Sales spiked after U.S. President Barack Obama's re-election and surged following two highly publicized shootings on opposite sides of the country on fears of stricter gun control measures.

FBI data shows the number of firearm background checks, a proxy for legal gun sales, has risen dramatically during President Obama's time in office.

There were nearly 9 million background checks performed in 2005. In 2008, the year before President Obama took office, that number climbed to 12.7 million. In the first 11 month of 2013, that figure swelled to more than 19 million.

Gun dealers and buyers say the rapid rise in gun sales shows little signs of abating as more and more Americans take the Second Amendment right "to keep and bear arms" more seriously.

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