Stocks in the firearm industry were extremely hot in 2013 as
worries over new laws spurred many to buy up guns and ammo before
fresh regulations could come into effect. However, any big changes
to nationwide gun legislation haven't really taken place, cooling
demand for many firearms across the country.
Yet even with the lack of legislative impetus, many stocks in the
firearm industry remain well-positioned for further gains, and are
actually looking quite promising for 2014 as well. This is
particularly true when investors take a closer look at one of the
most famous names in the industry,
Smith & Wesson (
SWHC in Focus
The Springfield, Massachusetts-based arms maker is probably best
known for its pistols and revolvers, but the firm is also involved
in a variety of rifles and firearm-related products as well. The
company is over 150 years old, and it has stood the test of time
selling its defense products to individuals, police, military and
While the fear of increased gun legislation has certainly boosted
volatility in SWHC over the past few years, the stock has moved
significantly higher regardless of these worries, and even as these
concerns have cooled in recent months, SWHC has remained a top
performer. In fact, the stock has added over 80% in the past two
years, while it is sporting a 27% gain in the past six months
compared to a roughly 7.5% move higher for the S&P 500 in the
same time frame.
However, it is worth noting that SWHC was on a bit of a bearish
trend in 2014, at least during the first two months of the year
when the stock lost about 15% of its value in the time frame as
worries built that the gun boom was beginning to fade. The company
put these concerns in the rear view mirror though, as its earnings
report on March 4
crushed estimates while the firm raised guidance as well.
For the most recent quarter, our Zacks Consensus Estimate for SWHC
earnings was 29 cents per share, but Smith & Wesson posted EPS
of 35 cents a share, crushing the estimate by over 20%. This also
continued the solid streak of beats for the company, as it has now
beat in each of the last four quarters including an average beat of
Beyond this solid beat on the earnings front, SWHC also boosted its
guidance up to $1.39-$1.42 a share for the full year. Thanks to
this great earnings report and the move higher in guidance, it
shouldn't be much a surprise to note that many analysts bought in
to this continued upswing in shares of Smith & Wesson, leading
to several earnings estimate revisions higher.
In the past two months, six estimates for SWHC have moved higher,
and not a single one has gone lower in the same time period. The
current consensus has now moved up to $1.43/share-just ahead of
management guidance-baking in a very solid EPS growth rate of just
under 17% for the company.
Clearly, even as the gun market cools off, SWHC remains
well-positioned for further gains, and a solid level of growth as
well. Due to this, the company has earned itself a Zacks Rank #1
(Strong Buy) meaning that we are looking for more outperformance
from the company in the weeks ahead as well.
SWHC has been a very solid stock over the past two years, but it
ran into some turbulence to start 2014 as many were worried that
the gun boom was fading. However, the firm surprised with a very
solid report and increased guidance, dispelling those worries with
Given how bullish analysts have been on the company following this
report-and SWHC's track record at earnings-there is plenty of
reason to believe that more gains are ahead for this company. So
before you think that you missed out on the gun stock boom, take a
closer look at SWHC, the stock remains well-positioned for growth
and it could still have plenty of room left to run if recent
earnings estimate revisions are any guide.
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SMITH & WESSON (SWHC): Free Stock Analysis
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