Shoot Now Ahead Of Smith & Wesson June 16th Earnings Release

Strong performance over the past year and in the last quarter

Smith & Wesson Holding Corp. (NASDAQ: SWHC), an American firearms manufacturer with international reach, has demonstrated strong growth over the past year, as well as during the third quarter results it reported on March 3, 2016. The company has its next estimated reporting date for June 16, 2016.

In its last report, the company reported earnings per share of $0.59. The consensus estimate among analysts had been $0.41, meaning that SWHC outperformed the analysts' estimates by 43.9 percent. The consensus EPS estimate for the upcoming report is $0.54, which is an increase from the same quarter's EPS in 2015 of $0.45. The company has reported higher earnings per share for each quarter in the past year. Since May 2015, SWHC has also had gains of 56.4 percent in its annual sales. Among analysts, the consensus price target is currently set at $27.55, and it was trading at $24.40 on the afternoon of June 2, 2016.

Newest SWHC firearm targets high-growth self-defense market

Smith & Wesson is currently targeting the self-defense gun market with its newest gun. The self-defense market is an area of the industry that consistently demonstrates the highest growth. The company's M&P Shield line of guns has become the top-selling gun line among personal protection guns on the market. The line was introduced in 2012. Since that time, SWHC has sold more than 1 million of guns from the line. Previously, the line's offerings included a 9-millimeter model and a .40 S&W. It now is also offering a .45 caliber, a size that gives more firepower, which many gun customers prefer.

Comparison with competitor: Sturm, Ruger & Co.

Both Smith & Wesson and competitor, Sturm, Ruger & Co. (NSYE RGR) have performed extremely well year over year since May 2015. During that time period, SWHC has given its investors a return of 57 percent while Ruger has given a return of 24 percent. While both are excellent, it is clear that SWHC is the winner for total returns. Sturm Ruger pays dividends to its investors at a healthy 2.2 percent while SWHC does not. During market downturns, SWHC has completed stock buybacks on fairly large scales, taking advantage in an opportunistic manner. Ruger has done the same, albeit on a much smaller scale. Both companies have shown few signs of slowed growth. In its third quarter, SWHC reported a more than 60 percent increase in its net quarterly sales. Ruger reported a more than 26 percent increase in its sales during its first quarter. Overall, Smith & Wesson appears to be the better buy, although both companies appear strong.

What the future could hold

The possibility of the future implementation of federal gun regulations could impact the bottom line for both SWHC and RGR. Currently, however, neither shows signs of slowed growth. The FBI reported that it completed 2.1 million background checks for guns in April 2016, which was 25 percent more than it reported for April 2015. One concern involves the current presidential election. Some analysts believe that the drive to purchase guns could slow if Donald Trump is elected president since fears of about the potential of new regulations would decrease. Conversely, if Hillary Clinton is elected, gun sales should continue to be strong. The next president will also likely appoint at least one Supreme Court Justice, potentially putting gun rights in play.

Recommendation: Buy

Smith & Wesson's strong performance over the past year, in which it beat the estimates of analysts during every quarter, appears likely to continue for some time. Even with the consensus price target set at $27.95, there still appears to be room for growth. While the potential for future regulations could impact the company's sales, that is unlikely to happen at least for numerous months. If Hillary Clinton is elected, the fear concerning the potential for federal gun regulations could also drive sales as millions try to purchase guns while they can. For these reasons, we strongly suggest that investors consider buying shares of SWHC in advance of its release of its earnings report.