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Why Did Smith & Wesson Stock Gain 9.6% on Thursday?

Story Highlights

Firearm makers are in a tough spot with the latest cases of gun violence in schools. People in general and investors, in particular, are reluctant about the business model. Will Smith & Wesson continue to outperform expectations amid dampening demand?

Shares of American firearms manufacturer Smith & Wesson Brands (SWBI) jumped about 10% yesterday on multiple news stories.

Firstly, the news that the Supreme Court of the United States (SCOTUS) struck down a restrictive gun law ruling in New York pushed the shares of all firearm manufacturers higher. Secondly, the company released its fourth-quarter Fiscal 2022 results, which surpassed Wall Street expectations on both the sales and earnings fronts.

Lastly, shares got a boost on the news that the company’s Board of Directors raised the quarterly common dividend by 25% to $0.10 per share, which equates to a yield of 2.78%. SWBI stock ended the day up 9.6% at $14.36 on June 23.

Results in Detail

SWBI reported adjusted earnings of $0.82 per share, 15 cents higher than the analysts’ estimates. However, the figure was lower compared to the prior year’s adjusted earnings of $1.71 per share.

Similarly, Q4 net sales of $181.29 million fell 43.9% compared to the prior year but surpassed the analyst estimates by $1.45 million.

Adjusted earnings for FY22 declined 29 cents to $4.25 per share compared to FY21, and net sales fell 18.4% annually to $864.13 million.

Mark Smith, President and CEO of SWBI, said, “Although we expect inflationary pressures to persist and for firearm market conditions to return to more normalized levels in fiscal 2023, we are confident in our flexible manufacturing model and expect to benefit from the pricing and product portfolio adjustments that we made during the surge.”

Investors Weigh In

Notably, TipRanks’ Stock Investors tool shows that investor sentiment is currently Negative on Smith & Wesson Brands, with 1.0% of portfolios tracked by TipRanks decreasing their exposure to SWBI stock over the past 30 days.

Furthermore, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Smith & Wesson Brands is also currently Negative, as two hedge funds decreased their cumulative holdings of SWBI stock by 39,100 shares in the last quarter.

Ending Thoughts

Smith & Wesson Brands has outperformed analysts’ expectations and the management is confident about its long-term growth trajectory. However, due to people’s inhibitions following the recent massacres caused by gun violence, investors are shying away from holding the stock.

On the brighter side, the SCOTUS ruling has favored firearm makers, which also means that their business is here to stay in the long run.

Disclosure

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