Smith & Wesson Earnings Beat Very Low Estimates On Gun Sales

By Douglas A. McIntyre Updated Sep 12, 10:13PM EDT · Published Sep 10, 11:36AM EDT

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A cynic might say that the best thing that happened to firearms business was the election of Barack Obama in November 2008. Gun makers and owners, always distrustful of a Democratic administration, feared that the new administration would ban sales of semiautomatic weapons, so everyone was trying to buy before the administration took office. Then fears grew that ammunition sales would be curtailed, and ammo flew out the doors as fast as it could be made. Some stores were forced to limit sales of popular calibre ammo due to extremely high demand.

That was then. Now, firearms makers are having a tougher go. Smith & Wesson Holding Corp. (NASDAQ: SWHC) reported weak first-quarter 2011 earnings today. In July, competitor Sturm, Ruger & Co. Inc. (NYSE: RGR) reported lower revenue second-quarter revenue and earnings. Alliant TechSystems Inc. (NYSE: ATK), the largest ammo maker in the US, reported strong sales in its security and sporting group for its first quarter of 2011. Even stun-gun maker Taser International Inc. (NASDAQ: TASR) had a poor second quarter, though it surpassed EPS loss estimates of -$0.03 by a penny.

As with so many things these days, US gun sales have followed the economic outlook. In the first half of 2009, when doom and gloom about the economy was very high, gun sales soared as people bought firearms for personal protection, fearing that unemployment would lead to a rise in crime.

Those fears haven’t panned out. The FBI’s preliminary report for 2009 on US crimes begins by noting that violent crime fell by 5.5% in 2009 compared with 2008. Property crimes also fell, buy 4.9%.

Depending on which side of the gun-control issue one believes, the drop in numbers means either that a well-armed citizenry prevented crime or that gun buyers wasted their money.

Yet any way one looks at it, guns and ammo sales are up. The FBI’s National Instant Check System and payments to states from federal excise tax collections on sales of guns and ammo are up more than 25% in FY 2010, to more than $470 million. In August 2010, the FBI has conducted more than 1 million background checks, and 2010 is on a pace to meet or, more likely exceed, the 14 million background checks completed in 2009.

S&W shares are down nearly 9%, back up slightly after hitting a new 52-week low earlier this morning.

Paul Ausick

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.