Smith & Wesson gives investors plenty to like

It's selling everything it can make now, and it still has room for future growth.

By Jonathan Berr Jun 28, 2013 9:49AM
Smith & Wesson (SWHC), which has been synonymous with firearms since before the Civil War, is on a roll.

The firearms manufacturer recently reported that fiscal fourth-quarter net income more than doubled to $25.17 million, or 38 cents per share, compared with $12.47 million, or 19 cents per share a year earlier. Revenue climbed 37.6% to $178.7 million as the company ratcheted up its production in response to surging demand, which it was unable to meet.
Excluding one-time items, profit was 44 cents per share, beating the 40-cent average estimate of analysts surveyed by Bloomberg. Likewise, the revenue figure beat the $170.6 million consensus forecast.

Smith & Wesson expects its current-quarter sales to rise by about 21% to between $162 million and $167 million, which is better than analysts were forecasting. So, too, is its profit guidance of 34 cents to 37 cents a share. Its yearly outlook was also better than Wall Street's forecasts. And the company announced plans to spend as much as $100 million repurchasing stock, more than double an earlier $33 million plan.

An attendee walks through the Smith and Wesson booth during the 2013 NRA Annual Meeting and Exhibits on May 3, 2013 in Houston, Texas (© Justin Sullivan/Getty Images)Surprisingly, the Connecticut company's shares are dirt-cheap. Its price-to-earnings ratio of 9.18 is at a five-year low. The average 52-week price target on the stock is $12.25, more than 20% higher than where it recently traded.

For investors who don't feel squeamish about investing in a gunmaker, Smith & Wesson has plenty to like.

Published reports indicate that it has regained some of the ground it lost to Glock in the military and police market in recent years. Its potential for growth doesn't end there, given that Smith & Wesson doesn't dominate in any particular area. The company controls about 37% of the revolver market, 13% of the pistol market and 7% of the hunting rifle market, according to Gun Wiki.

As The Wall Street Journal recently noted, many gun-rights supporters were concerned that new restrictions on their ability to purchase firearms would be implemented when President Obama was reelected. Indeed, the numbers of firearms permits, a good proxy for sales, surged 29% from last November through January on a year-over-year basis.

Those restrictions, however, have not come to pass. But as Smith & Wesson's inability to keep up with demand shows, for whatever reason, consumers are buying guns at a robust pace. And if you're name is Smith & Wesson, that means you're a company in the right place at the right time.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
Tags: SWHC
37Comments
Jun 28, 2013 10:44AM
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The massive arming of America is a little troubling...  70 million guns since Obama has been in office.   But an armed society is a polite one, and crime drops the more heavily armed people are.

But we seem to be expecting massive turmoil.   But the more heavily armed people are the more Freedom and Liberty there is.   

Jun 28, 2013 11:00AM
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Obama has been the best thing for weapons sales since rifling was put in barrels of weapons.  For anti gun folks this makes a bullet more accurate. Of course everyone wants to be able to defend themselves. When the bottom drops out of our economy. You will have only your wits to be able to take care of your family.  PS a country boy can survive...
Jun 28, 2013 10:56AM
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What to understand. That is one stock that will always remain stable. Say, do, or try what you like, guns are here to stay in our present society. Not much will change in the next 50 years, so if you are 20 now and want to retire on a stable stock investment that would be it, if you could get it to start with.
Jun 28, 2013 12:22PM
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These are the no brainer Companies Wall Street Hypsters have little time or use for.  A straightforward, respected, tried and true firm with a great history and reputation.  This is the type of firm Amazon, Starbucks, and Microsoft, hope they can someday be.  If you can't shear the investors locks on an occasion; as is tough to do with a Company of this strength, reputation, and success, then they are left alone to practice my grandfathers old type of Capitalism.  You know a great product at a good value and eons of business experience. Jonathon definitely dragged this one out of the closet. These are the types of businesses' we grew up with when I was a kid.  We had many of these to choose to go to work for after High School.  Remember those days when you either went to work or went to college after high school. Oh I guess that is now ancient history.  You had several alternatives as a High School Graduate and one could easily be following in your fathers footsteps and working for a Company like S&W.
Jun 28, 2013 11:13AM
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When I grew up everyone in our Families owned guns, granted many or most were weapons for hunting...But still there were several handguns around also..

We didn't grow up in Texas either..

I don't know about re-Arming America, for anything other then to thwart crimes...

And maybe some is Grandkids wanting to go out and hunt with Grampa or just plink cans.

But I also know more women are getting pea shooters too...Some are much larger.

Maybe some of it is women staying single longer..?

Good for them....As long as they don't start shooting everyone that knocks on their door or some poor drunken bastard, that pinches their azz on a Saturday night.

Jun 28, 2013 11:33AM
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If you can't buy ammo the pistol is pretty useless. The fed should have fought the drug war the same way......... bought up all the drugs with fake monies.

 

All that aside...... they make great firearms.

Jun 28, 2013 2:02PM
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The only Smith&Wesson stock I want is walnut on a Model 29  ;)
Jun 28, 2013 11:01AM
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i PRETTY MUCH AGREE WITH YOUR, read on swhc Fats, I just have trouble figuring the value of the investment...No dvidend, an old Company, old product lines of value and a demand that can't be met..

Something like that should play over the $10 threshold...

So I guess appreciation is what you hope for or invest in...

Jun 28, 2013 2:13PM
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You folks are correct-it is a terrific investment based in Springfield, MA.

I spent many years on wall st-do not ever short any stock-that is a bet and not an investment.

Look at the history of mankind-owning guns and their stocks makes more sense when you consider that, there will always be bad people who want to hurt you or your country.

Why buy tech shares, when the high fliers of just 10 years ago made their owners penniless.

Smith and Wesson has been around since before the civil war-they must have a decent business model. They make fine revolvers and pistols. Their machine shop workers are so talented that, S&W does machine shop work for third parties.

Safe investing and shooting (I like target practice at the range)!

Jun 28, 2013 1:28PM
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Then why is the stock not going up? 
Jun 28, 2013 1:54PM
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A small dividend would have been nice.  I do like the stock buyback, though.
Jun 28, 2013 1:40PM
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are'nt they a Mass company?? not CT
Jun 28, 2013 3:44PM
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I also thought the S&W Model 1000 setting about 5 feet away from me said SF,MA. on it...

But can't find it in the engraving or on the outside, so not really sure where it was made.

Jun 28, 2013 3:36PM
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Yes, BLUEJAY; They are a Springfield,MA. Company....

 

Don't let Jonathon Berr or Classic Lady...Throw you any spitballs..let alone curves.

Jun 28, 2013 3:26PM
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We know what the Article says Classic...The guy questioned because it may be wrong..

He may be right ??

 

I believe "nothing I hear and only half or what I read" or something like that...?

Even Wikipedia is wrong on several occassions, until they get it right..

From "the horses mouth.."

Jun 28, 2013 3:38PM
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Don't try and fkin wiggle out of the discussion Classic....

 

edited for*** I'll bet that neither of them have ever fired a Springfield, I have several times.

Jun 28, 2013 1:55PM
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Think Springfield Mass. is their Headquarters...They may have plants somewhere else in the East..

Think our friend's Aunt, works for them in NH or Conn.

He went back East and bought a couple AR-15s or AKs a few months back..

She had ordered them for him from her Company....Much cheaper then here. 

Jun 28, 2013 1:32PM
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Never thought it was hard to get a gun, drugs or alcohol..Easiest, during Prohibition..

Got plenty of Guns, plenty of Alcohol...

And if we wanted weed, we just got to wander down to the neighbors on the weekend..

They offer me tokes,,,,errrr, Cokes for free..But I really don't care much for any kind of drug..

Except maybe Caffeine(coffee), whiskey and tobacky...Are those drugs ?? Really ?

Jun 28, 2013 11:35AM
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You guys have finally run Antman and Kramer off the front pages and relegated them to writing more for the sophiscated readers elsewhere....Of course Cramer has Articles everywhere..

I just knew this was going to happen sooner or later...Oh, well.

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