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Leading firearm manufacturer, Smith & Wesson Holding Corp. (SWHC - Snapshot Report) reported earnings of 40 cents per share in the first quarter of fiscal 2014, 42.8% higher than 28 cents reported in the year-ago quarter.

The results of the company were 11.1% higher than the Zacks Consensus Estimate of 36 cents.

Total Revenue

The company reported net sales of $171 million in the quarter, up 25.74% from $136 million in the year-earlier period. The year-over-year growth was driven by strong customer demand for firearms, backed by an increase in its manufacturing capacity. In addition, the solid performance from its M&P products continued to boost the top line.

Net sales in the reported quarter were higher than the Zacks Consensus Estimate of $165 million.

Quarterly Highlights

Gross profit grew to 45% of net sales from 40.1% a year ago. The increase in sales volume and a better product mix benefited margins. Operating expenses as a percentage of revenue declined by 20 basis points year over year.  

The company continues to invest consistently in research and development (R&D) activities to develop new products. In the first quarter of fiscal 2014, the company spent $1.29 million on R&D versus $1.11 million in the prior-year quarter.

Operating income clocked $55.1 million versus $36.1 million in the year-earlier period, increasing 52.6%.

Smith & Wesson’s decision to refinance its debts during the reported quarter is likely to lower its interest expenses marginally.

Financial Update

Cash and cash equivalents as of Jul 31, 2013, were $146.5 million versus $100.5 million as of Apr 30, 2013.

Cash from operating activities was $19.01 million in the first quarter of fiscal 2014 versus $9.27 million in the first quarter of fiscal 2013.


The company expects total revenue in the second quarter of fiscal 2014 in the range of $135 million to $140 million. GAAP earnings per share in the second quarter of fiscal 2014 are expected between 20 cents and 22 cents.

Total revenue for fiscal 2014 is now expected in the range of $610 million to $620 million, up from the prior forecast of $605 million to $615 million. This reflects an estimated 4.7% year-over-year growth at the mid point. GAAP earnings per share for fiscal 2014 are expected between $1.30 and $1.45.

Other Company Releases

Johnson Outdoors Inc. reported earnings of $1.37 per share in the third quarter of fiscal 2013, surpassing the Zacks Consensus Estimate of $1.02.

Sturm, Ruger & Company Inc. (RGR - Snapshot Report) announced second quarter 2013 operating earnings of $1.63 per share, surpassing the Zacks Consensus Estimate of $1.18.

Arctic Cat Inc. (ACAT - Snapshot Report) announced fiscal first quarter 2014 operating earnings of 40 cents per share, surpassing the Zacks Consensus Estimate of 20 cents.

Our Take

Smith & Wesson continues to post strong results. The firearm maker has surpassed our expectation for the last eight quarters. The company’s decision to buy back shares worth $100 million to increase shareholder value is appreciable.

Smith & Wesson Holding Corp. has 1,475 full time employees and a market cap of $0.74 billion. The company manufactures, designs and supplies a large variety of firearms and related items to its worldwide customers.  Smith & Wesson currently has a Zacks Rank #3 (Hold).

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