Smith & Wesson Shares Slide On Disappointing Outlook

Smith & Wesson Holding Corp. gave a downbeat outlook for the current quarter and trimmed its annual forecast, sending shares of the nation's biggest gun maker by sales lower after hours.

The company posted strong results for the latest quarter, which ended in October, saying profit jumped sharply as revenue climbed 63%. But the market is sensitive to any sign of weakness amid fears of a retreat in demand in the coming quarters with the government in the hands of gun-friendly Republicans.

Gun sales tend to be stoked by concerns of tightening restrictions, a persistent fear when it was believed Hillary Clinton would move into the White House. With Donald Trump the victor of the Nov. 8 U.S. presidential election, gun controls aren't likely to be strengthened, lessening the fear that firearms may be more difficult to obtain.

The firm shed one-fourth of its value in the three trading days after the election amid the jittery market, though sales through November have continued to climb. Shares of Smith & Wesson fell 6.6% in the after-hours session Thursday to $22.40.

The Federal Bureau of Investigation said background checks for firearms totaled 2.56 million in November, compared with 2.24 million a year earlier.

"Our retailer checks suggest buying patterns were changed little by the election result, although some sources indicate overbuying by smaller, newer distributors in anticipation of a Clinton win," said analysts at Cowen & Co. in a client note.

But market observers were eagerly awaiting the latest outlook, with analysts at Wunderlich Securities predicting that background checks, which have been increasing all year, might turn negative as soon as December.

Smith & Wesson said it sees adjusted earnings on a per-share basis for the current quarter in the range of 52 cents to 57 cents, lower than the 59 cents expected by analysts surveyed by Thomson Reuters. The company projected revenue between $230 million and $240 million, while analysts forecast $237.7 million.

For the full year, the company now expects adjusted earnings between $2.42 and $2.47, narrower and lower on the top end compared with the previous forecast between $2.38 and $2.48. The gun maker boosted its revenue expectation, projecting a range of $920 million to $930 million, up from a previous $900 million to $920 million.

Over all, for the latest quarter ended in October, Smith & Wesson reported a profit of $32.5 million, or 57 cents a share, up from $12.5 million, or 22 cents a share, a year earlier. Excluding certain items, the company's per-share earnings rose to 68 cents from 25 cents a year earlier.

Sales jumped 63% to $233.5 million.

The company had expected adjusted profit between 53 cents and 57 cents on revenue in the range of $220 million and $230 million.

Smith & Wesson hopes to broaden its appeal with a proposed name change of its holding company to American Outdoor Brands Corp., though it will continue to use Smith & Wesson for its best-selling handguns.

The proposed name switch continues the push announced in January by Chief Executive James Debney to diversify into the larger recreational market that it has pursued by acquiring makers of hunting knives, flashlights and camping equipment.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

(END) Dow Jones Newswires

December 01, 2016 19:55 ET (00:55 GMT)

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