Smith & Wesson Holding Corp.
) has plans to acquire Tri Town Precision Plastics Inc. for $23
million in cash through its wholly-owned subsidiary, Deep River
Plastics LLC. This move will strengthen Smith & Wesson's
focus on its Military and Police (M&P) firearm business. The
deal is expected to close by May 5 and is subject to customary
The impending acquisition will enable Deep River Plastics to
acquire all of the net assets of the polymer supplier, Tri Town
Precision. This company has long been a supplier of polymer
frames and associated products for a large number of Smith &
Wesson firearms, comprising M&P models. These molds accounted
for nearly two-thirds of Tri Town Precision's revenues generated
from sales to Smith & Wesson.
The takeover will thus allow Smith & Wesson to vertically
integrate key manufacturing components thereby driving
flexibility and lowering production costs. Importantly, the deal
is expected to be accretive to fiscal 2015 results, boosting its
gross margin by 70 to 90 basis points and earnings per share by 4
cents to 5 cents.
Since the reelection of President Obama in 2012, gun sales have
surged on fears of tighter regulation for weapons in the wake of
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, had sparked off fierce controversy about the
proliferation of firearms.
Apart from Smith & Wesson, other gun makers like
TASER International Inc.
Sturm, Ruger & Company, Inc.
) have also benefited from the demand leap. Smith & Wesson
posted upbeat results with earnings beating the Zacks Consensus
Estimate by 20.7% in the third quarter of fiscal 2014. The
reported number was also higher than the year-ago earnings by
34.6%. The bottom-line beat came on the back of higher sales. The
company's gross margin also expanded 360 basis points year over
year during the quarter, buoyed by a favorable product mix,
absorption, and manufacturing efficiencies, accompanied with
reduced promotions and the absence of lower-margin Walther
The company continues to launch new products, as seen at the SHOT
Show held in January, particularly in the revolver category.
These products were well received with incremental orders pouring
in from customers.
Smith & Wesson currently has a Zacks Rank #2 (Buy). Another
stock worth buying now is
Marine Products Corp.
) with a comparable Zacks Rank.
MARINE PRODUCTS (MPX): Free Stock Analysis
STURM RUGER&CO (RGR): Free Stock Analysis
SMITH & WESSON (SWHC): Free Stock Analysis
TASER INTL INC (TASR): Free Stock Analysis
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