Despite Near Term Pain, Our LT Outlook For S&W Remains Largely Unchanged, Says Wedbush

In a research note issued today, Wedbush analyst Rommel Dionisio reiterated coverage with an Outperform rating on Smith & Wesson (NASDAQ:SWHC) shares, but reduced his price target to $15 (from $20) following the company’s first-quarter results, posting revenue of $132 million and EPS of $0.26, relatively in line with consensus figures of $134 million and $0.25, respectively. However, citing bloated retail inventory levels, especially in rifles, management lowered FY15 guidance for revenue to $530-540 million from $585-600 million, and EPS to $0.89-0.94 from $1.30-1.40.

Dionisio noted, “despite near term pain, our long term outlook for S&W and the industry overall remains largely unchanged. The firearms industry the past 1 ½ years has seen the best of times (demandsurge following Newtown) and now the worst of times (reorders to refill inventories, compounded with pull forward of tactical rifles, resulted in inventory overhang). While necessary retail inventory destocking requires near term shipment cuts, our outlook for long term mid-single industry growth remains unchanged, with increased participation and improving retail sellthrough trends the past few months supporting such a thesis. Meanwhile, successful new product launches continue to drive market share gains for S&W.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rommel Dionisio has a total average return of 8.8% and a 51.9% success rate. Dionisio has an 39.9% average return when recommending SWHC, and is ranked #659 out of 3264 analysts.

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