A Perfect Storm Drives Record Gun Sales

It is no secret that gun sales are through the roof.  Still, up over 27% year over year?  That is what Smith & Wesson Holding Corporation (NASDAQ: SWHC) disclosed today.  What we are tracking today is not the results of one company.  This says a lot about society as fear and concern prevail for many Americans.  It is also an election year and the economic growth has been slowing at the same time as employment data remains weak.  In short, this is the perfect climate for driving gun sales.

Records were set in annual units produced by Smith & Wesson and on annual cash generated. S&W said that these results are driven by strong sales of M&P polymer pistols and M&P modern sporting rifles.

The S&W earnings report is full of more “record-setting events” by the gun-maker that were just impossible to ignore.  The fourth quarter saw a record at $129.8 million and the company posted a record earnings of $17.8 million for its fiscal year with another record of earnings from operations of $17.8 million.

More gains are expected ahead as well with first quarter sales of $125.0 million to $130.0 million.  Here is the amazing stat: that is 36% growth.  GAAP earnings for the first quarter are put at $0.16 to $0.19 per share versus $0.12 expected.  For the year ahead, S&W sees sales from continuing operations of between $485.0 million and $505.0 million or about 17% total.  GAAP earnings per share from continuing operations are being targeted between $0.60 and $0.65 for fiscal 2013 versus $0.50 expected.

Smith & Wesson added 16% to the after-hours gains and this has shares up at $7.90 in the after-hours against a 52-week range of $2.29 to $8.62. Sturm, Ruger & Co. Inc. (NYSE: RGR) did not telegraph the same great data with its earnings and its shares remain well off of its highs.  The S&W sales are adding to Sturm, Ruger shares as it is up 2.4% at $38.30 in the after-hours session.

It is easy to assume what is happening here.  Some of this is the election cycle.  Some of it is the economic uncertainty of what lies ahead with the global economies.  When you combine both forces, the end result is explosive growth in gun sales.

JON C. OGG