Smith & Wesson Holding Corp.
) reported first-quarter fiscal 2015 (ending Jul 31, 2014) earnings
from continuing operations of 26 cents per share, beating the Zacks
Consensus Estimate by a penny. The number was, however, lower than
the year-ago earnings of 40 cents per share as sales remained weak.
The company's share price plunged 11% during after-hours trading
yesterday on the lowered guidance due to high inventories of modern
sporting rifles industry-wide.
Total revenue in the quarter decreased 22.9% year over year to
$131.9 million, missing the Zacks Consensus Estimate of $134
million by 1.7%. Lower long gun sales, including modern sporting
rifles, were the main reason for the top-line decline. Yet, handgun
sales remained strong during the quarter.
In the quarter under review, gross profit decreased 32.5% year over
year to $49.1 million. This corresponds to a gross margin of 37.2%,
down 540 basis points year over year, due to lower sales volumes of
modern sporting rifles and related decrease in fixed-cost
absorption, combined with three less production days than the first
quarter last year.
On the cost front, operating expenses were $23.3 million, or 17.7%
of revenue, compared with $24.8 million, or 14.5% of revenue
recorded in the first quarter of fiscal 2014.
Operating income in the quarter was $25.8 million, down 46.3% year
As of Jul 31, 2014, the company had cash and cash equivalents of
$83.5 million versus $68.9 million as of Apr 30, 2014. Operating
cash stood at $10.8 million for the first-quarter fiscal 2015 while
capital expenditure was $14.6 million.
For its fiscal second quarter 2015, Smith & Wesson expects net
sales in the $100-$110 million range. Earnings from continuing
operations are expected to come in between 4 cents and 8 cents per
share for the upcoming quarter.
For fiscal 2015, sales are now expected to be $530-$$540 million,
sharply lower than the $585-$600 million expectation the company
laid out earlier. Earnings will likely be 89 cents to 94 cents per
share this year, compared with $1.30 to $1.40 expected earlier.
As per data from FBI's National Instant Criminal Background Check
System (NICS), the number of background checks carried out on
people seeking to buy firearms declined in February, March and
April from the year-earlier period.
Since the reelection of President Obama in 2012, the company had
been seeing higher sales on fears of tighter regulation for
weapons. A series of unfortunate shooting incidents in the past -
the Boston Marathon terror attack on Apr 15, 2013 and the tragic
shootout at the Sandy Hook Elementary School Newtown, CT on Dec 14,
2012 - sparked off fierce controversy about the proliferation of
However, Obama failed to clear the bill through the Congress that
would have put restrictions on these guns. With the removal of the
threat of restrictions on gun sales, the earlier rush to possess
firearms has ebbed to a large extent. This is reflected not only in
the sales decline in the reported quarter but also in the soft
sales guidance for fiscal 2015.
Yet, the Springfield, MA based firearm maker saw a boost in handgun
sales in the quarter, driven by increasing consumer interest for
Smith & Wesson Holding Corp. manufactures, designs and supplies
a large variety of firearms and related items to its worldwide
The leading publicly traded U.S. firearms maker, Sturm, Ruger &
Company, Inc. (
) reported second-quarter 2014 earnings of $1.12 per share, missing
the Zacks Consensus Estimate of $1.28 by 12.5%. The reported figure
also plunged 31.3% from $1.63 per share earned in the year-earlier
quarter on lower sales.
TASER International Inc. (
) reported earnings of 7 cents per share during the second-quarter
2014, beating the Zacks Consensus Estimate by 2 cents. The beat was
driven by higher law enforcement weapon handle sales. However, the
quarterly figure was lower than the year-ago profit by a penny.
Smith & Wesson currently has a Zacks Rank #3 (Hold). A
better-ranked stock worth buying now is Malibu Boats, Inc. (
) holding a Zacks Rank #2 (Buy).
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