Smith & Wesson Holding Corp. tumbled the most in nine months after surprising investors with a profit and sales outlook for fiscal 2015 that was lower than analysts estimated.
The company yesterday projected sales will fall as much as 7 percent in fiscal 2015 to a range of $585 million to $600 million. Analysts had been forecasting sales to slip less than 1 percent to $621 million. It expects earnings per share of $1.30 to $1.40, less than the $1.50 average estimate of analysts, according to data compiled by Bloomberg.
Shares of the second-largest publicly traded firearms company in the U.S. fell 8.7 percent to $15.52 at the close of trading in New York. They had risen 26 percent this year through yesterday.
Smith & Wesson had benefited as concerns of tighter regulation following the December 2012 massacre at Sandy Hook Elementary in Newton, Connecticut, spurred enthusiasts to buy more guns. In the absence of new regulation, after the Senate rejected gun-buyer background checks a year ago, the frenzy has faded. Sales of assault-style weapons especially have tapered.
“Demand for modern sporting rifles has fallen off significantly following the post-Newton legislation-driven demand and the ensuing post-surge period,” said Chris Krueger, an analyst at Lake Street Capital Markets, in a note to clients. “Long gun sales will decline about 25 percent in FY2015 and become a smaller percentage of Smith & Wesson’s sales.” Krueger rates the shares buy.
The company, based in Springfield, Massachusetts, also said that about one week of its annual two-week shutdown will occur in the first quarter, reducing production by approximately $6 million to $8 million.
The outlook comes as the number of background checks carried out on people seeking to buy firearms declined in February, March and April, from the year earlier period, according to figures from the FBI’s National Instant Criminal Background Check System (NICS).
“It has been a rough period at times in terms of NICS data year over the year as a result of rifles, though the company is growing hand gun sales,” said Brian Ruttenbur, an analyst at CRT Capital Group, in an interview before the results were released.
In the fiscal fourth quarter, which ended April 30, net income was little changed at $25.1 million. Sales fell 4.6 percent to $170.4 million.