June 25, 2022, 12:04 p.m. EDT

Smith & Wesson stock soars as Supreme Court ruling boosts ‘pretty big’ part of gun maker’s business

By Tomi Kilgore

Shares of Smith & Wesson Brands Inc. rallied again Friday, as better-than-expected earnings and a dividend hike followed a decision by the Supreme Court of the United States to strike down a New York gun-control provision.

The gun maker’s stock (NAS:SWBI) soared 14.5% to , after running up 9.6% on Thursday. The two-day climb of 25.5% came after the stock closed at a two-year low on Wednesday

Meanwhile, shares of fellow firearms company Sturm, Ruger & Co. Inc. (NYS:RGR) have bounced 71% in two days, after closing Wednesday at an 18-month low.

In a post-earnings conference call with analysts, Lake Street Capital’s Mark Smith asked for a comment about the Supreme Court ruling , which said the New York law that forbids people from obtaining a permit to carry a handgun publicly unless a special need is demonstrated violated the U.S. Constitution’s Second and Fourteenth Amendments.

“So, broadly on the ruling, I mean, it simply clarifies that responsible, law-abiding citizens don’t need to ask the government’s permission to exercise their constitutional rights,” Chief Executive Officer Mark Smith said, according to a FactSet transcript. “And insofar as impact to concealed carry in our products, concealed carry is a pretty big portion of our market, we expect that, as it expands the access of those products to those law-abiding citizens that they’ll have a positive impact on us,”

CEO Smith said it was “probably too early” to tell what that impact on earnings might be.

Separately, the company reported late Thursday net income for the fiscal fourth quarter to April 30 of $36.1 million, or 79 cents a share, compared with $89.2 million, or $1.70 a share, in the same quarter a year ago.

Excluding nonrecurring items, adjusted earnings per share of 82 cents beat the FactSet consensus of 57 cents.

Revenue fell 44% to $181.3 million, but was above the FactSet consensus of $168 million.

The company said average selling prices rose by nearly 12%, while unit volumes were down about 50% from a year ago.

CEO Smith said on the post-earnings call that for the remainder of fiscal 2023, he expects market demand will continue to be down “significantly” from pandemic-surge levels of last year.

“While interest in the shooting sports remains healthy and we are encouraged to hear from our channel partners that many first-time consumers are returning to purchase additional firearms, with the offsetting impact of record inflationary pressures on the pocketbooks of mainstream American households, we are anticipating that demand in the firearms market this year” will look a lot like in did in pre-pandemic calendar 2019, Smith said.

Separately, the company said it was increasing its quarterly dividend by 25%, to 10 cents a share from 8 cents a share. The new dividend will be payable July 21 to shareholders of record on July 7.

Based on current stock prices, the new annual dividend rate implies a dividend yield of 2,43%, which compares with Sturm, Ruger’s yield of 5.04% and the implied yield for the S&P 500 index (S&P:SPX) of 1.65%.

Smith and Wesson’s stock has now slipped 7.6% year to date and Sturm, Ruger shares have eased 2.9%, while the S&P 500 has lost 17.9%.

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