Here’s Why Shares of Gunmaker Smith & Wesson Are Jumping
This story has been updated to reflect the opening of trade.
Gunmaker Smith & Wesson (SWHC) is projecting an incredible start to 2016, which sent shares up more than 11% in morning trading.
The company raised its revenue and earnings guidance for the current quarter and fiscal year, based on strong sales at recent gun shows as well as an uptick in year-end FBI background checks, an indicator that potential customers are looking to obtain gun licenses.
Smith & Wesson now expects sales between $175 million and $180 million from $150 million to $155 million for its third and present quarter, which ends Jan. 31. The company also boosted its adjusted earnings outlook, raising its estimate to between 39 cents and 41 cents from 27 cents and 29 cents for the same quarter.
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The optimistic guidance improved Smith & Wesson’s already bright prospects for the fiscal year, which ends April 30. The company expects revenue between $650 million and $660 million, up from its earlier projection of between $625 million and $635 million. The company also raised its expected adjusted earnings to between $1.36 and $1.41 per share from between $1.26 and $1.31 per share.
Smith & Wesson’s revised guidance comes on the heels of President Barack Obama’s intention to tighten gun control laws. It’s likely that customers are preparing to stock up on the company’s products before any new regulations, such as stricter licensing and background checks, take effect.
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The heated partisan debate over gun control in the U.S. contributed to the company’s stellar stock performance last year. By mid-Dec. Smith & Wesson’s share price had surged more than 151%.