Smith & Wesson Upgraded to Strong Buy - Analyst Blog

On May 27, Zacks Investment Research upgraded Smith & Wesson Holding Corporation SWHC to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Smith & Wesson has been reporting strong financial results and surpassing our estimates for the last 11 quarters. The company ended the third quarter of fiscal 2014 with earnings of 35 cents per share which surpassed the Zacks Consensus Estimate of 29 cents by 20.7%.

The company's total revenues in the quarter increased 7.1% year over year, mainly due to a 29.9% year-over-year increase in handgun sales.

The company is focused on the development of new products. In January this year, Smith & Wesson launched a new revolver in the SHOT Show, which was well received by its customers. The company expects to receive solid orders for its California-compliant version of M&P SHIELD and SDVE polymer pistols in the future.

These products are expected to offset the impact of those M&P pistol models that will not stay on the Roster. Both the M&P Shield and the SDVE pistols are projected to remain on the California Roster of Handguns Certified for Sale as long as no changes are made to those models. The company for that very reason does not plan to make any changes.

Smith & Wesson maintains a sound balance sheet. The company had around $45.3 million in cash and cash equivalents (including restricted cash) at the end of the last reported quarter.

Management has also shared the benefits with its shareholders through systematic buybacks. From Dec 2012 to Jan 2014 the company repurchased $135 million of its common stock. Recently, the company's board of directors authorized the repurchase of $30.0 million shares of its common stock.

Other stocks worth considering in the same industry include Net 1 Ueps Technologies Inc. UEPS, Malibu Boats, Inc. MBUU and Brady Corp. BRC. While Net 1 Ueps Technologies holds a Zacks Rank #1 (Strong Buy) Malibu Boats and Brady Corps. carry a Zacks Rank #2 (Buy).

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