Firearms maker Smith & Wesson Holding Corp.(SWHC), Thursday reported a surge in profit for the fourth quarter, driven mainly by higher revenues and stronger margins, as sales of firearms rose.
Shares of Smith & Wesson surged 13 percent in after-hours on the news.
Smith & Wesson, which other than its namesake brand also sells M&P and Thompson/Center Arms, said sales for the quarter grew 27.7 percent to $129.8 million. The growth was driven mainly by strong sales of M&P (military and police) polymer pistols and M&P modern sporting rifles.
Six Wall Street analysts on a consensus estimated revenues of $126.53 million for the quarter.
Fourth-quarter gross margin sharply rose to 36.1 percent from 30.7 last year, positively impacted by higher sales volume, cost savings efforts and a favorable product mix. Significant one-time benefits related to reductions in inventory and legal reserves, and the higher production volume also contributed to margin growth.
Operating costs, as a percent of sales, dropped to 16.3 percent from 22.9 percent last year, driven mainly by cost-savings efforts as well as helped by the consolidation of Thompson/Center Arms operations to Springfield, Massachusetts.
The Springfield, Massachusetts-based company's profit for the fourth quarter improved to $12.5 million or $0.19 per share from $1.1 million or $0.02 per share in the year ago quarter.
On average, six analysts polled by Thomson Reuters expected earnings of $0.17 per share for the quarter. Analysts' estimates typically exclude special items.
Looking forward to the first quarter, Smith & Wesson expects earnings from continuing operations in a range of $0.16 to $0.19 per share and sales of $125 million to $130 million.
Analysts currently expect earnings of $0.12 per share on revenues of $112.55 million for the first quarter.
For the full year 2013, the company anticipates earnings from continuing operations between $0.60 and $0.65 per share and net sales of $485 million and $505 million.
Analysts currently expect earnings of $0.50 per share and revenues of $465.98 million for fiscal year 2013.
Chief Financial Officer Jeffrey Buchanan said, "As we move into fiscal 2013, we will use the strength of our balance sheet to continue investing in our business."
SWHC closed Thursday's trading at $6.89, down $0.15 or 2.13%. Nevertheless, the stock gained $0.93 or 13.50% in after-hours trade.
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