Smith & Wesson Still A Buy After Next 'Important Step' In U.S. Military Contract, Wunderlich Notes

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In a report published Tuesday, Wunderlich analyst Rommel Dionisio maintained a Buy rating on
Smith & Wesson Holding Corp
SWHC
, with a price target of $19. Smith & Wesson is a leading producer of firearms in the US. The company's strong track record of winning contracts from various law enforcement agencies and police departments make it a strong contender for a US Army contract. The US Army has issued a draft request for proposal for a new handgun to replace the current Beretta M9 9 mm pistol, in use for 30 years. "Vendors were requested to submit feedback/questions no later than June 28, implying a fairly rapid time frame at this point for the Army to begin the testing and selection process," analyst Rommel Dionisio mentioned The process of selecting the final supplier for the guns is likely to be completed within the next year. In the report Wunderlich noted, "The eventual winner of this sole source contract award would likely see an estimated $500mm to replace all the M9 pistols currently in use, as well as another $125mm- $150mm annually, for perhaps decades to come, for replacement units and spare parts. Such a contract could translate into an estimated impact on Smith & Wesson's EPS of $1.00 for the initial contract fulfillment and $0.40 annually after that." Smith & Wesson pre-announced its 4Q results, the second quarterly beat after several successive misses last year. "Such improved fundamental performance reflects the rapidly improving environment for the firearms industry overall, as retailer inventory destocking comes to a close, particularly in handguns," Dionisio pointed out. The company is scheduled to report its fiscal 4Q15 results on June 18.
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Posted In: Analyst ColorReiterationAnalyst RatingsWunderlich
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