Smith & Wesson Up; Fiscal 4Q Net More Than Doubled >SWB
(when gubbments come to take your rights away - what did the founding fathers say do?)
By Henry Sanderson
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Gun maker Smith & Wesson Holding Corp.'s (SWB) shares rose Friday after the company said its fiscal fourth-quarter profit more than doubled, indicating a revamp of its marketing strategy launched last year is paying off.
Smith & Wesson's said late Thursday that its fourth-quarter net income was $4.2 million, or 10 cents a share, up from $1.8 million, or 5 cents a share, a year earlier. The company raised its fiscal 2007 earnings forecast to 30 cents to 32 cents a share, from the 30 cents a share predicted in March. Firearms sales for the year grew 29.8% year-over-year, with a 69% increase in pistol sales and a 13.7% increase in revolver sales.
Smith & Wesson shares were recently trading at $7.92, up 17 cents, 2.2% on volume of 585,600 shares, up from average daily volume of 368,200 shares. The stock's gain follows a 6% jump on Thursday ahead of the earnings report, issued after the closing bell.
The 154-year old U.S. icon said the results reflect the efforts of new managers, brought on board early last year, who have boosted marketing to government and military agencies in the U.S. and worldwide. In addition, new products, such as the Military & Police line of pistols and rifles introduced in September, have proven popular. The company said 23 agencies had so far ordered the new M&P polymer pistol, while another 29 had approved the gun for purchase. "Their core business is really getting entrenched in law enforcement," said Merriman Curhan Ford analyst Eric Wold, who doesn't own shares in the company. He added the M&P line had been designed in consultation with law enforcement agencies.
The company also benefitted from restructuring its sales operations during the year, moving away from outsourcing to using a Smith & Wesson sales force to market its products directly. Consumer sales grew 32% in the fourth quarter, and international sales grew by 58.7%.
Smith & Wesson won its first military contract in 15 years during the past year, receiving four orders from the military for shipment to the Afghanistan National Police.
Currently, U.S. armed forces use Italian-made Berettas, whereas the FBI and other domestic agencies use handguns from Glock, an Austrian company.
Smith & Wesson said it has intensified its efforts to seek business with other federal agencies. A spokeswoman for the company said they had hired marketing firm Greenberg Taurig in Washington.
"As military government contracts come available we want people to know we're here, and we'd like to see our military with guns made by a company in the U.S.," said company spokeswoman Elizabeth Sharp.
Chief Operating Officer Leland Nichols told Dow Jones Newswires that a U.S. Special Operations contract for 55,000 pistols was up for grabs, adding the military was exploring options for replacing its 9mm pistols, as its current contract with Beretta expires in 2007. He said Smith & Wesson was vying for both contracts.
In addition, Nichols said, the company was pushing to supply guns to the Iraqi police force, after the success of its Afghanistan order.
Cowen & Co. analyst Cai von Rumohr said this was a result of increased market share of a fragmented market, rather than a growth of the gun market.
Smith & Wesson could also become a military supplier, he said, in part because it was an U.S. company, but also because of complaints about the 9mm Berettas' lack of firing power.
Smith & Wesson started shipping its version of the 9mm pistol in May. The 9mm is crucial for overseas operations, as it is the international standard and the approved handgun of the North Atlantic Treaty Organization.
"I think they (Smith & Wesson) have a good chance of penetrating the U.S. military," he said. von Rumohr doesn't own shares in the company.
In addition, von Rumohr said, the FBI's contract with Austrian company Glock expired a year ago, although the agency still has an inventory of its pistols.
In a research note, von Rumohr said he expects the company to outperform the market in the next six to 12 months on new products and additional military and police orders.
-By Henry Sanderson, Dow Jones Newswires; 201-938-4046; henry.sanderson@dowjones.com
(END) Dow Jones Newswires
June 16, 2006 14:26 ET (18:26 GMT)
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