Smith & Wesson surges as profit forecast is upgraded

Smith &Wesson Holding Corp. shares surged as the gunmaker forecast annual results above analysts’ expectations and two research firms upgraded the stock.

“Strong management with an intelligent strategy and healthy financials offer potential” for further improvement, Cai Von Rumohr, an analyst at Cowen &Co., said in a note Friday as he upgraded the stock to outperform from market perform. Von Rumohr wrote that sales of long guns are up and cited continued “handgun vigor.” Craig-Hallum Capital Group raised its rating to buy from hold.

Smith &Wesson jumped 9.7 percent to $23.87 at 9:32 a.m. in New York. The shares had fallen 1 percent this year through Thursday. Rival Sturm Ruger &Co. climbed 4.7 percent to $62.23.

Adjusted earnings for fiscal 2017 will be $1.83 to $1.93 a share, the Springfield, Massachusetts, company said in a statement Thursday after the close of regular trading. The projection was higher than the $1.66 average of seven analyst estimates compiled by Bloomberg. Revenue was forecast at $740 million to $760 million, compared with an estimate of $732 million.

Profit rose to 66 cents a share on an adjusted basis in the fiscal fourth quarter, Smith &Wesson said, beating the average estimate of 54 cents. Sales of $221 million for the quarter, which ended April 30, compared with analysts’ estimate of $215 million.

“We made important progress on several new products and product extensions,” Chief Executive Officer James Debney said on a conference call with analysts. That helped the company capitalize on “increased consumer demand for firearms.”

The results predated the June 12 massacre in an Orlando, Florida, nightclub that left 49 victims dead. The suspect in the attack, Omar Mateen, was armed with an assault-type weapon and a handgun, authorities said. He also was killed.

Shares of Smith &Wesson and Sturm Ruger surged Monday after the attack. Gunmaker stocks typically rise after mass shootings as buyers often stockpile weapons for self-defense or ahead of a possible push to tighten gun laws.

On the conference call, executives said the forecast didn’t include any potential surge in demand resulting from the recent events.

Smith &Wesson plans to use a $175 million revolving line of credit next year “to fuel growth opportunities, both organic and inorganic,” Chief Financial Officer Jeff Buchanan said.

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