Wunderlich: More Aggressive Orders For Smith & Wesson Lead To Increased Guidance

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Wunderlich on Thursday issued a report on Smith & Wesson Holding Corp SWHC after the gun manufacturer issued a higher earnings guidance. Wunderlich rates Smith & Wesson as a Buy and raised its price target from $17 to $19.

Analyst Rommel Dionisio wrote, “For the second quarter in a row, Smith & Wesson Holding Corp. (SWHC) preannounced an upside surprise, increasing its guidance by a meaningful magnitude for 4Q, by approximately $13mm for revenue and by about $0.10 for EPS. Such a positive data point gives us increased confidence that retailer inventory destocking in the firearms industry is rapidly coming to an end, that retailers are consequently becoming more aggressive with their order patterns, and that manufacturers such as Smith & Wesson can soon resume normalized throughput and utilization levels, thereby improving operating margins.”

Wunderlich believes that dealers are becoming more confident with their order patterns and inventory flow has become more predictable. The company's increased earnings guidance is due partly from this increased confidence which has caused more aggressive orders from the retailers. Going forward Smith & Wesson may disclose new product launches this summer to capitalize on better market conditions. Furthermore, the U.S. Army will be in discussions with the gun manufacturer for a new pistol contract which could be another positive catalyst.

Shares traded recently at $15.02, up 0.33 percent on the day.

A recent article on Benzinga discussed the potential upside to Smith & Wesson.

“Cowen & Co.'s Cai von Rumohr called the pullback in permits "a good entry point" to acquire Smith & Wesson and said its recovery from the bursting of the so-called Obama gun bubble remains on track.”

“Von Rumohr, who reiterated an Outperform rating and $18 target on Smith & Wesson, discounted the recent slowdown, noting that the company's production, which was cut 25 percent last year to address an inventory glut, will soon match the company's sales and lead to higher margins.”

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Posted In: Analyst ColorPrice TargetAnalyst RatingsRommel DionisioWunderlich
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