Smith & Wesson (NASDAQ:SWBI) recently reported a positive FY 2024 4Q results, beating top- and bottom-line expectations. Revenue increased by 10% compared to last year, driven by substantial market share gains due to high consumer demand for new products. Yet, shares declined over 10% immediately following as investors were disappointed in management’s projection of a roughly 10% decline in Q1 due to ongoing inflation and a competitive summer season.
However, the firm anticipates an upturn approaching the presidential election, with mid-to-high-single-digit revenue growth by the end of the year, bolstered by the seasonal surge, new product launches, and investments in expanding capacity. The shares appear attractively priced relative to the industry, making the stock a solid option for long-term value investors looking to buy on the dip.
Smith & Wesson’s Iconic Brand
Smith & Wesson is a leader in firearm manufacturing and design in the U.S. It offers a wide collection of firearms and suppressor products under the iconic Smith & Wesson and Gemtech brands.
The company’s products are marketed to various demographics, including firearm enthusiasts, collectors, hunters, competitive shooters, law enforcement, and individuals seeking home and personal protection. It has also extended its expertise to manufacturing services such as forging, machining, and precision plastic injection molding via its subsidiary, Smith & Wesson Precision Components.
The firearms market is anticipated to see a CAGR of over 6% between 2024 and 2032, driven by the changing regulatory environment and increasing innovation.
Smith & Wesson’s Q4 and Full-Year Results
The company recently posted its financial results for the fourth quarter and full year FY2024. Its total revenue was $159.15 million for the quarter, exceeding analysts’ estimates of $156.80 million, while earnings per share (EPS) came in at $0.45, surpassing expectations of $0.35.
Looking at the entire fiscal year, net sales saw an increase of 11.8%, ending at $535.8 million with a gross margin of 29.5%, slightly lower than the previous fiscal year’s 32.2%. GAAP net income was $39.6 million or $0.86 per diluted share, up from the last fiscal year’s $36.9 million or $0.80 per diluted share.
Also, non-GAAP net income was relatively steady at $42.6 million, or $0.92 per diluted share, compared to the previous year’s $43.3 million, or $0.94 per diluted share. Lastly, adjusted EBITDA was $94.3 million, or 17.6% of net sales, a minor decrease compared to the previous year’s $95.2 million, or 19.9% of net sales.
The company announced that the board has approved an 8.3% hike in the quarterly dividend, taking it to $0.13 and delivering a dividend yield of 3.36%. This increased dividend will be distributed to registered stockholders on July 11, with the payment scheduled for July 25th.
What is the Price Target for SWBI Stock?
Analysts following the company are constructive on the stock. For instance, Lake Street analyst Mark Smith recently raised the price target on the shares from $16 to $18 while keeping a Buy rating, noting the positive Q4 results, and applying a 7.5-times multiple to the FY25 adjusted EBITDA estimate of $106.9M.
Overall, Smith & Wesson Brands is rated a Moderate Buy based on two analysts’ recommendations and price targets recently assigned. The average price target for SWBI stock is $18.00, representing a potential upside of 22.12% from current levels.
Despite the post-earnings drop in price, the stock has been upward trending, climbing over 20% in the past year. Shares trade in the middle of their 52-week price range of $10.11 – $18.05 and appear to be relatively undervalued based on a P/E ratio of 17.16x, which is well below the Aerospace & Defense industry average of 25.99x.
Smith & Wesson in Summary
Despite Smith & Wesson’s recent Q4 results, shares experienced a sharp drop post-earnings due to predicted inflation headwinds and a challenging summer season. Yet, management has pointed to an anticipated recovery based on projected mid-to-high-single-digit revenue growth by year-end. The stock trades at an attractive price relative to industry standards, presenting a strong investment case for long-term value investors in the wake of the market dip.
