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Shares of Smith & Wesson Brands Inc. rallied on Friday after the gunmaker reported another strong profit bump and sales that more than doubled, as demand for guns continued to climb at record levels.
The 168-year-old handgun and rifle maker reported net income Thursday night that jumped to $ 52.2 million, or 92 cents a share, from $ 1.3 million, or 2 cents per share, the previous year.
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“The research indicated that for people who own firearms, the average number of firearms owned was eight.”
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Excluding non-recurring items, adjusted earnings per share of 93 cents beat the FactSet consensus by 63 cents.
Sales climbed 118.7% to $ 248.7 million, above the FactSet consensus of $ 223 million.
SWBI stock,
rose 3.4% in active afternoon trading. The volume exceeded 3.2 million shares, more than the daily average of 2.5 million shares. The stock more than doubled (up 119.6%) in 2020, while the S&P 500 SPX index,
gained 14.3%.
In a conference call with analysts after the results, chief executive Mark Smith said the “second consecutive record quarter” came as federal background checks, which he said were considered the best indicator Available consumer demand for firearms, were 57.5% above levels seen in the same period a year ago.
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In the first 11 months of 2020, there have been 19.2 million background checks for firearm purchases, the most in an 11-month period since the Federal Bureau of Investigation began recording records. data in 1998, Smith said.
Also read: Gun stocks rebound as background checks continue to rise, street violence fuels demand.
And based on gun industry estimates provided by the National Shooting Sports Foundation, or NSSF, Smith & Wesson estimates that nearly 8 million Americans were first-time gun buyers.
This bodes very well for the company, given what it could mean on long-term gun demand.
“In October, we conducted a study on the attitudes and use of over 1,200 law-abiding gun owners to better understand today’s gun consumer.” Smith said on the analyst’s call, according to a FactSet transcript. “Research indicated that for people who own guns, the average number of guns owned was eight.
And NSSF research has indicated that about one in four new gun owners have purchased additional guns at higher prices than when they first purchased them.
“Therefore, this expanded consumer base of new gun owners represents a healthy long-term opportunity for the industry as a whole, but specifically for Smith & Wesson,” said Smith.
Wedbush analyst James Hardiman raised his share price target to $ 18 from $ 17 after the results, but reiterated the neutral rating he had on the company since March 2019. He said the results could be tempered in the future as supply is “very exhausted” and could remain a problem in the quarters to come.
“Demand remains very strong, but Black Friday and the holiday shopping season have been held back this year due to a lack of inventory for the industry,” Hardiman wrote in a note to customers.
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