Leading firearm manufacturer, Smith & Wesson Holding
Corporation ( SWHC ) approved a
buyback of up to $100 million worth of shares. The company's shares
shot up 5.2% to $9.78 on Friday, Jun 14, 2013, on the announcement
of the share repurchase program and its impressive preliminary
fiscal fourth-quarter 2013 earnings report. This marks the highest
one-day jump since Jan 16, 2013.BLACK DIAMOND (BDE): Free Stock Analysis ReportPOLARIS INDUS (PII): Free Stock Analysis ReportSTURM RUGER&CO (RGR): Free Stock Analysis
ReportSMITH & WESSON (SWHC): Free Stock Analysis
ReportTo read this article on Zacks.com click here.Zacks Investment
The gun maker Smith & Wesson also said that the $100 million
repurchase plan replaces a $15 million program announced in
December last year. This includes $75 million that would be
purchased through a fixed-price tender offer. Depending on the
stock price and number of shares purchased, this buyback will
likely cut the number of outstanding shares by around 15%.
The company's buyback announcement assures shareholders that all
is well with the company. This is further backed by a surge in
demand seen in the fiscal fourth quarter 2013. Based on preliminary
data, the company expects a 38% jump in its revenue in the quarter
from the year-earlier period. The increase in demand for firearms
maybe in anticipation of tighter regulation for weapons in the wake
of a series of unfortunate shooting incidents in the recent past.
The Boston Marathon terror attack on Apr 15, 2013 and the tragic
shootout at the Sandy Hook Elementary School Newtown, Connecticut
on Dec 14, 2012 had sparked off fierce controversy about the
proliferation of firearms.
In fact, Springfield, Mass.-based Smith & Wesson benefited
from the demand leap, saying it anticipates its earnings to report
at 44 cents per share, up from the 27 cents in the year-ago quarter
and from the Zacks Consensus Estimate of 41 cents. As a caveat, the
possibility of a new gun law might have an adverse impact on gun
sales in the upcoming quarters.
The company, which plans to report fourth-quarter earnings on Jun
25, provided earnings per share guidance of 38 cents to 40 cents on
the back of sales of $165 million to $170 million in Mar
The present valuation also looks attractive as Smith & Wesson
is trading at a forward P/E of 9.4x, a 34.5% discount to the peer
group average of 14.4x. Return on Equity of the company is
50.6%, substantially higher than the peer group average of
Smith & Wesson retains a short-term Zacks Rank #3 (Hold).
Other better-placed stocks worth buying now include Sturm,
Ruger & Company Inc. ( RGR ), Black
Diamond, Inc. ( BDE ) and
Polaris Industries, Inc. ( PII ). While Sturm,
Ruger & Company carries a Zacks Rank #1 (Strong Buy), Black
Diamond and Polaris hold a Zacks Rank #2 (Buy).