Consumer Demand Drives Q1 Upside Surprise For Smith & Wesson

Smith & Wesson Holding Corp SWHC reported its Q1 results ahead of expectations and raised its full-year guidance. The beat was driven by a surge in consumer demand as well as market share gains, Wunderlich’s Rommel Dionisio said in a report. He maintained a Buy rating on the company, while raising the price target from $34 to $36.

Drivers Of Higher Sales

Smith & Wesson reported its Q1 revenue at $207 million, ahead of the consensus estimate of $198 million. GAAP EPS came in at $0.57 and adjusted EPS at $0.62, both beating the consensus forecasts of $0.49 and $0.54, respectively.

“Better-than-expected sales growth was driven by the recent spike in consumer demand for firearms in the wake of the Orlando incident. In addition, the company saw impressive contribution from recent new product launches in firearms, which enabled additional market share gains,” analyst Dionisio wrote.

GM Expansion

Apart from strong sales upside, Smith & Wesson achieved impressive gross margin expansion of 250bps to 42.3 percent, reflecting “greater fixed-cost absorption from increased revenue and production volume, favorable product mix shift, and reduced promotions and discounting,” Dionisio mentioned.

Looking Ahead

The company raised its FY17 revenue guidance from $740-$760 million to $900-$920 million, its GAAP EPS projection from $1.71-$1.81 to $2.09-$2.19 and its adjusted EPS forecast from $1.83-$1.93 to $2.38-$2.48.

The upward revisions not only incorporate the strong Q1 figures and overall momentum, but also contribution from the recently announced acquisitions of Taylor Brands and Crimson Trace, the analyst stated.

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