The shares of Smith & Wesson Brands Inc. rose again Friday after better-than-expected earnings and a dividend hike followed a decision by the United States Supreme Court to repeal a New York gun control provision.
The weapons maker’s SWBI stock, +14.48%, rose 14.5% after increasing 9.6% on Thursday. The two-day climb of 25.5% came after the stock closed Wednesday at its two-year low.
Meanwhile, the shares of fellow firearms company Sturm, Ruger & Co. Inc. RGR, +2.72%, up 71% in two days, after closing at an 18-month low on Wednesday.
In a post-profit conference call with analysts, Lake Street Capital’s Mark Smith asked for comment on the Supreme Court ruling, which said New York’s law prohibiting people from being licensed to carry a gun in public unless a special need is shown to have violated the Second and Fourteenth Amendments to the United States Constitution.
“So, broadly speaking about the ruling, I mean, it just clarifies that responsible, law-abiding citizens don’t have to seek government permission to exercise their constitutional rights,” Chief Executive Officer Mark Smith said, according to a FactSet transcript. “And as far as the impact on concealed carry in our products, concealed carry is quite a large part of our market, as it expands the access of those products to those law-abiding citizens, we expect that they will have a positive impact on us, ”
CEO Smith said it was “probably too early” to say what that impact on earnings might be.
Separately, late Thursday, the company reported net income for the fiscal fourth quarter to April 30 of $36.1 million, or 79 cents per share, compared to $89.2 million, or $1.70 per share, in the same quarter. A year ago.
Excluding one-time items, adjusted earnings per share of 82 cents surpassed the FactSet consensus of 57 cents.
Revenue fell 44% to $181.3 million, exceeding the FactSet consensus of $168 million.
The company said average selling prices were up nearly 12%, while unit volumes were about 50% lower than a year ago.
CEO Smith said during the post-profit call that he expects market demand for the remainder of the fiscal year 2023 to continue to decline “significantly” from last year’s pandemic peak.
“While interest in shooting sports remains healthy, and we are encouraged to hear from our channel partners that many new consumers are returning to purchase additional firearms, with the offsetting impact of record inflationary pressures on mainstream US households’ wallets, we are anticipating on that demand in the firearms market this year” will be a lot like the 2019 pre-pandemic calendar, Smith said.
The company said it would increase its quarterly dividend by 25%, from 8 to 10 cents a share. The new prize will be made payable to shareholders of record on July 7 on July 21.
Based on current stock prices, the new annual dividend rate implies a dividend yield of 2.43%, compared to Sturm, Ruger’s gain of 5.04%, and the implied return for the S&P 500 index SPX, +3.06% of 1.65%.
Shares of Smith and Wesson are down 7.6%, and Sturm, Ruger shares are down 2.9%, while the S&P 500 has lost 17.9%.
