Leading firearm manufacturer Smith &Wesson Holding
) priced $75 million 5% senior notes due 2018. The notes are
offered to qualified institutional buyers under private placement.
The sale of the senior notes is expected to close by Jul 15, 2014.
Notes are issued to investors at 100% of its principal amount.
Purpose of the New Issue
This firearm producer intends to utilize the net proceeds from the
issue for general corporate purposes. These include vertical
integration opportunities, capital investments, acquisitions and
Smith & Wesson exited fiscal 2014 with total interest expense
of $12.6 million, up 112.1% year over year. The newly issued senior
notes will increase the annual interest burden of the company by
$3.75 million. We believe Smith & Wesson will easily meet the
higher interest obligation given its present financial standing.
Smith & Wesson has been a consistent performer and in that
process outpaced the Zacks Consensus Estimate in the last four
quarters with an average beat of 18.78%.
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 periods. This will mean a likely slump
in gun sales at Smith & Wesson and its peers like
Sturm, Ruger& Co. Inc.
Over the last 30 days, the Zacks Consensus Estimate for fiscal 2015
decreased 4.5% to $1.34 per share as four estimates were revised
downward during that period.
Smith & Wesson currently carries a Zacks Rank #3 (Hold).
Investors interested in this space can consider stocks like
Callaway Golf Co.
). Both these stocks carry a Zacks Rank #2 (Buy).
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STURM RUGER&CO (RGR): Free Stock Analysis
BRUNSWICK CORP (BC): Free Stock Analysis Report
SMITH & WESSON (SWHC): Free Stock Analysis
CALLAWAY GOLF (ELY): Free Stock Analysis Report
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