Smith & Wesson Q1 Profit Down, Shares Plunge On Outlook

(RTTNews) - Firearms maker Smith & Wesson Holding Corp. (SWHC), Tuesday reported a first-quarter profit that plunged from a year ago, as revenues declined sharply reflecting lower sales of long guns. Earnings for the quarter came in ahead of Wall Street estimates, but revenues fell short of expectations.

Moving ahead, the company detailed a weak outlook for the second quarter and lowered its full-year 2015 guidance, dragging its shares down 10 percent in after-hours trade.

Springfield, Massachusetts-based Smith & Wesson's first-quarter profit dropped to $14.6 million or $0.26 per share from $26.5 million or $0.40 per share last year. On average, nine analysts polled by Thomson Reuters expected earnings of $0.25 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 to $131.9 million from $171.0 million last year. Analysts had a consensus revenue estimate of $133.9 million for the quarter.

Sales drop primarily reflects lower sales of long guns, including modern sporting rifles, which drove 87 percent of the first quarter decline.

Gross margins, or percentage of sales left after deducting production costs, dropped to 37.2 percent from 42.6 percent last year. Operating expenses, as a percentage of sales, rose to 17.7 percent from 14.5 percent last year.

Looking ahead to the second quarter, the company expects earnings of $0.04 to $0.08 per share and revenues of $100 million to $110 million. Analysts currently expect earnings of $0.28 per share on revenues of $136.8 million for the quarter.

For fiscal year 2015, the company now projects earnings of $0.89 to $0.94 per share and revenues of $530 million to $540 million. Analysts currently expect earnings of $1.36 per share on revenues of $593.8 million for the year.

Earlier, the company expected earnings of $1.30 to $1.40 per share and revenues of $585 million to $600 million for the full year.

"We believe that the current environment reflects high inventories industry-wide resulting from channel replenishment that occurred following an earlier surge in consumer buying. That environment, combined with typical seasonality that slows consumer buying activity during the summer, is causing us to lower our financial outlook for fiscal 2015," said CEO James Debney.

SWHC closed Tuesday's trading at $13.10, down $0.01 or 0.11%, on the Nasdaq. The stock further dropped $1.30 or 9.92 percent in the after-hours trade.