Smith & Wesson shot down on lowered guidance, downgraded to "underperform"
Shares of Smith & Wesson Holding Corp. (Nasdaq: SWHC) are getting hammered today after the handgun maker lowered its outlook for 2008.
Rodman and Renshaw analyst Amit Dayal downgraded the small cap to “market underperform” from “market perform” on the company’s lowered guidance and expectations for a weak consumer firearms market.
For fiscal 2008, which ends in April 2008, the small cap is now projecting net income of $17 million, or $0.40 per share on sales of $300 million based on increased promotional costs, an extended Springfield plant shutdown in December, and the lower absorption rate of overhead costs due to lower production volumes. The new guidance compares with previously forecasted earnings of $23.5 million, or $0.53 per share, and revenues of $325 million.
“This guidance may be slightly aggressive given that we are just at the beginning of the slowdown,” Dayal wrote in a research note today. “In addition, visibility into contract wins from the Military remains unclear. We do not anticipate any material developments on this front to occur in 2008 and will not be surprised if this extends into 2009.”
For 2008, Dayal is forecasting revenues of $281 million and earnings of $0.30 per share. The consensus of seven analysts polled by Thomson Financial is for earnings of $0.52 on revenues of $321.79 million.
Dayal says he believes unfavorable macroeconomic conditions, including high energy prices and the mortgage debacle, will negatively impact the company, as the analyst says the company has become increasingly reliant on the consumer sporting goods market.
After three years of robust growth, Dayal is expecting a slowdown in 2008 in the firearms market.
Dayal has a target price of $4.50 on the stock.
Shares of Smith & Wesson (SWHC) tumbled 28.33%, or $2.81, to $7.11 at 11:30 a.m. ET. Shares of Smith & Wesson have been trading in the range of $9.51 to $22.80 for the past 52 weeks.
