Smith & Wesson Gun Demand Blows Profits, Sales and Guidance Away

You already have seen the positive earnings report from Sturm, Ruger & Co. (NYSE: RGR) and positive comments from sporting goods stores about gun and ammo sales. Now we have Smith & Wesson Holding Corp. (NASDAQ: SWHC) shooting the lights out on its earnings report. If you want to know what the specter of gun control does, imagine a 38.8% sales gain year over year! That is what the gunmaker reported in its fiscal third quarter.

Net sales came to $136.2 million and net income from continued operations was $17.5 million or $0.26 in earnings per share. Thomson Reuters had estimates of $0.23 EPS and $133.7 million in sales.

The company also raised its guidance for fiscal 2013 net sales from continuing operations to a range of $575 million to $580 million. Thomson Reuters has estimates of $561.3 million in sales.

Demand is helping margins as well: Gross profit for the third quarter was 36.8% of net sales at $50.1 million compared with gross profit of 30.6% of net sales or $30.0 million a year earlier. At the end of the quarter, S&W had no borrowings under its credit facility and it ended the quarter with a cash balance of $62.0 million. It even spent some $20 million buying back shares of its common stock in the quarter.

We were not expecting that the numbers would have a profound market move in either direction. After all, the demand and shortages are very well known. That being said, Smith & Wesson shares were down about 0.6% at $10.22 today and the stock is down about 1% or so in the after-hours.

Our take is rather simple: imagine how much the gun industry could have made if they were actually able to even be close to meeting the demand out there right now.