Smith & Wesson Q2 Profit Down, Outlook Weak - Update

(RTTNews) - Firearms maker Smith & Wesson Holding Corp. (SWHC), Thursday reported a drop in profit for the second quarter, as revenues and margins declined sharply reflecting lower sales of long guns. Earnings for the quarter came in ahead of Wall Street estimates as did revenues. Moving ahead, the company detailed a weak outlook for the third quarter and lowered its full-year 2015 guidance.

Springfield, Massachusetts-based Smith & Wesson's second-quarter profit dropped to $5.05 million or $0.09 per share from $16.99 million or $0.28 per share last year. On average, seven analysts polled by Thomson Reuters expected earnings of $0.07 per share for the quarter. Analysts' estimates typically exclude special items.

Smith & Wesson, which other than its namesake brand also sells M&P and Thompson/Center Arms, said revenues for the quarter dropped 22.1 percent to $108.45 million from $139.29 million last year. Analysts had a consensus revenue estimate of $105.79 million for the quarter.

The company said sales decline reflects lower demand as consumers have purchased firearms in anticipation of possible additional restrictive regulations. Sales of long guns, primarily modern sporting rifles, declined 50.3 percent, while handgun sales declined 15.0 percent.

Gross margin, or percentage of sales left after deducting production costs, dropped sharply to 32.1 percent from 41.6 percent last year. Operating expenses, as a percent of sales, rose to 22.1 percent from 20.9 percent last year.

Looking forward to the third quarter, the company expects earnings from continuing operations of $0.09 to $0.11 per share and net sales of $113.0 million to $118.0 million. Analysts currently estimate earnings of $0.20 per share on revenues of $129.94 million.

For full fiscal 2015, the company now expects earnings from continuing operations of $0.66 to $0.70 per share and sales of $504.0 million to $508.0 million. Analysts currently estimate earnings of $0.89 per share on revenues of $530.41 million for the quarter.

Earlier, the company expected earnings of $0.89 to $0.94 per share and revenues of $530 million to $540 million.

SWHC closed Thursday's trading at $9.41, down $0.10 or 1.05%, on the Nasdaq. The stock further dropped $0.21 or 2.23% in the after-hours trade.