Smith & Wesson Holding Corporation SWHC reported financial results for second-quarter fiscal 2017 ended Oct 31, 2016. The company’s adjusted earnings per share of 68 cents surpassed the Zacks Consensus Estimate of 55 cents by 23.6%. Reported earnings also surged 172% from the year-ago level of 25 cents.

Revenues

In the fiscal second quarter, Smith & Wesson’s total sales were $ 233.5 million, beating the Zacks Consensus Estimate of $ 228 million by 2.4%. Revenues were also up 63.1% from $ 143.2 million in the year-ago quarter.

The upside was driven by strong customer demand as revealed by the adjusted background checks of the National Instant Criminal Background Check System (NICS) and the company’s market share gains.
 

Operational Highlights

Total operating income during the quarter was $ 52.2 million, up 139.4% from $ 21.8 million in the year-ago quarter.

Gross margin for the quarter was 41.8%, compared with 39.2% in second-quarter fiscal 2016. The upside was mainly driven by increased production volumes at the firearms segment.

Smith & Wesson’s total operating expense was $ 45.5 million, up 32% from $ 34.4 million in the year-ago quarter. The upside was driven by a 57.4% increase in general and administrative expenses.

SMITH & WESSON Price, Consensus and EPS Surprise

 

SMITH & WESSON Price, Consensus and EPS Surprise | SMITH & WESSON Quote

Financial Condition

As of Oct 31, 2016, Smith & Wesson’s cash and cash equivalents were $ 73.9 million, compared with $ 191.3 million as of Apr 30, 2016.

Notes payable (net) was $ 188.3 million as of Oct 31, 2016, down from $ 166.6 million as of Apr 30, 2016.

Cash from operating activities in the first half of fiscal 2017 was $ 61.4 million, compared with $ 22.8 million a year ago.

Guidance

Smith & Wesson expects third-quarter fiscal 2017 non-GAAP earnings in the range of 52–57 cents per share, compared to its previous projection of 53–57 cents. The company raised its revenue guidance to $ 230–$ 240million from $ 220–$ 230million guided earlier.

For fiscal 2017, the company narrowed its non-GAAP earnings expectation to $ 2.42–$ 2.47 per share from $ 2.38–$ 2.48 projected previously. Revenues are now expected in the range of $ 920–$ 930 million, compared to its prior guidance of $ 900–$ 920 million.

Price Movement

During the quarter under review, Smith & Wesson’s rate of return was -12.94%, while that of its peer group was pegged at -13.75%. This could be because of the receipt of a commitment to increase the company’s revolving line of credit to $ 500 million from $ 225 million during the quarter. The expansion of its unsecured credit line will provide Smith & Wesson better opportunities to invest in its both organic growth and strategic acquisitions.

Peer Releases

TASER International Inc.’s TASR third-quarter 2016 earnings came in at 7 cents per share, beating the Zacks Consensus Estimate of 5 cents by 40%. This Scottsdale, AZ-based company’s earnings also improved 133.3% year over year. The upside was mainly driven by higher gross profit as well as operating income. The company has Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pool Corporation POOL, another Zacks Rank #2 stock, reported third-quarter 2016 earnings of $ 1.03 per share, which surpassed the Zacks Consensus Estimate of 99 cents by 4%. Further, the figure increased 14% year over year on the back of higher revenues.

Vista Outdoor Inc.’s VSTO second-quarter fiscal 2017 earnings came in at 74 cents per share, missing the Zacks Consensus Estimate of 61 cents by 21.3%. The company’s earnings were also down 17.5% year over year. The company has Zacks Rank #3 (Hold).

Zacks Rank

Smith & Wesson currently carries a Zacks Rank #4 (Sell).

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