Gun Sales Still Off the Charts, Stellar Sales and Earnings Growth at Smith & Wesson

Smith & Wesson Holding Corporation (NASDAQ: SWHC) is showing that gun sales are still booming. The firearm manufacturer reported that its preliminary sales for the quarter ending on April 30, 2013 rose by 38% to $179 million. Thomson Reuters had a consensus estimate of $170.7 million for the quarter. On a year over year basis, S&W generated GAAP earnings of $0.44 per share versus $0.27 per share in the same quarter a year ago.

April also marked the year-end and the 2013 annual sales were $588 million. This represents growth for the year of 43%. The company’s preliminary GAAP net income was also projected to be $1.22 per share, up from $0.40 per share from the prior year. Smith & Wesson ended the fiscal year with a cash balance of $100.5 million.

We would comment that Smith & Wesson’s release is still preliminary and it contains no guidance for the coming quarter nor for the coming year. If you have been to a gun store or to a retailer that sells guns and ammunition in the last six-month period since the Sandy Hook massacre you probably know all about the demand outstripping supply. The only word of caution we would offer here is that there was literally no commentary issued along with the earnings and sales growth. We also did not get to see how this was broken down in pistols, rifles and AR-style rifles.

The company’s board of directors authorized the purchase of up to $100 million of S&W’s common stock, including the purchase for cash of up to $75 million of common stock by way of a fixed-price issuer tender offer. The remaining authorized balance will be purchased in open market or privately negotiated transactions.

The company also in an SEC filing disclosed a debt swap. It said, “On June 11, 2013, we entered into exchange and purchase agreements to sell to institutional investors an aggregate of $75.0 million of our new 5.875% Senior Notes due 2017 in exchange for approximately $42.8 million of our 9.50% Senior Notes due 2016 from existing holders of such notes and the purchase by certain of such holders of additional New Notes for cash. The Note Exchange and Purchase will result in net cash to the company totaling approximately $25.0 million.”

Shares closed up 2.3% at $9.30 against a 52-week trading range of $6.29 to $11.25 and the stock is up close to 6% at $9.88 in the after-hours trading session. Its market cap at the closing bell price was about $597 million. Dirty Harry would be proud.