Smith & Wesson (SWHC – Free Report) is no strager to controversy. Gun advocates will tell you that people kill people while anti-gun supports say that people use guns to kill people. While both sides have their points, investors tend to think of SWHC as a stock that can benefit anytime the discussion comes up again. SWHC is a Zacks Rank #1 (Strong Buy) stock and it is the Bull of the Day.
SWHC beat the Zacks Consensus Estimate of $0.53 when it reported $0.62 in the first week of September. This $0.09 beat was good for a 17% positive earnings surprise.
The topline was also impressive with the company delivering $207M in sales when the Zacks Consensus Estimate was looking for $197M. That $10M beat was good for an 5% positive revenue surprise.
Smith & Wesson Holding Corporation is one of the world’s leading producers of handguns, law enforcement products and firearm safety and security products. Law enforcement personnel, military personnel, target shooters, hunters, collectors and firearms enthusiasts throughout the world have used the company’s products with confidence for 150 years. Smith & Wesson Corp. also manufactures and markets Smith & Wesson branded handcuffs and other products utilizing its metal working expertise and providing products and services to many external customers.
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The last time SWHC missed the Zacks Consensus Estimate was in 2011. Since then, there has been a string of 21 consecutive positive earnings surprises. This is a very enviable track record and demonstrates management’s ability to guide Wall Street to a beatable number and then still outperforming expectations.
When you have a Zacks Rank #1 (Strong Buy) you are going to see positive earnings estimate revisions. Following the most recent beat, the Zacks Consensus Estimate for 2016 has moved from $1.87 to $2.47. That is a huge move.
The 2017 Zacks Consensus Estimate was $2.15 prior to the earnings release and has since moved higher to $2.39
One thing that I have been looking for in stocks lately is room for multiple expansion. SWHC has that in spades. The stock trades at just 11x forward earnings compared to an industry average of 27x. The price to book multiple of 4.6x is inline with the industry average but the price to sales multiple of 2x is also showing a discount the industry average of 3x.
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.
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