Stock Up On Smith & Wesson Shares As Americans Stock Up On Guns

| About: Smith & (SWHC)

Gun maker Smith & Wesson (NASDAQ:SWHC) has been an American brand since 1852. The company's guns have been seen in movies like Dirty Harry and featured in song lyrics. The company has seen their shares rise over 50% on the year. Shares are over 25% off of their calendar year prices. I think the shares have more room to run in this election year.

Smith & Wesson operates under the following business segments:

  • Consumer - offered at sporting good stores like Dicks Sporting Goods (NYSE:DKS) and Cabela's (NYSE:CAB)
  • Professional - includes the international sales of Smith & Wesson products, along with law enforcement, government, and military sales

The company's brand names include:

  • Smith & Wesson
  • M & P
  • Thompson/Center Arms
  • Walther

Smith & Wesson presented at a May Investor Presentation, which can be found on Smith & Wesson's investor relations page. In that presentation, the company outlined some highlights:

  • Smith & Wesson is the market leader in firearms in the United States
  • Sales in last year's third quarter were up 23.8%, led by strong results in pistols (+23.4%) and modern rifles (+161.9%)
  • Paid down $30 million in long term debt
  • Guided fourth quarter sales higher to $113-$118 million
  • Creating new products consistently like the M&P Shield, which is 1" thin, and 6" in overall length
  • Improving operating margins. Goal of 8% for fiscal 2012 and long term goal to improve to 15% in 1-2 years, and 18% in 3-5 years.

In Smith & Wesson's fourth quarter earnings they blew away sales estimates with $129 million reported. This beat the company's previously guided $113-118 million range. With new guns laws possible, the company also saw its backlog for orders increase to $439 million, which was an increase of 135%. The company raised its full year guidance for the next fiscal year based on a continuance in strong forecasted sales.

Smith & Wesson is one of a handful of gun makers in the United States. Rivals like Glock and Sturm, Ruger & Co. have also seen their sales rise over the last 12 months. Smith & Wesson remains the market leader in the United States and is expanding its product offerings. The company is pushing hard into law enforcement and military training with new products like guns, handcuffs, and training equipment.

Smith & Wesson reports quarterly earnings on Thursday. Analysts on Yahoo Finance are predicting the gun maker to report $0.17 in earnings per share. Analysts see Smith & Wesson reporting $0.30 in earnings per share this fiscal year and $0.50 next fiscal year. These estimates could prove conservative given the election year. Consumers have already rushed out to buy guns this year as they believe tighter gun regulations are coming. Shares are likely not finished rallying, as November's election results could see hesitant buyers go to their local gun store. I think shares look attractive under $8.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.