Smith & Wesson Brands Fires Off A Dividend Increase

Tailwinds To Drive Smith & Wesson Brands Business

To say that there are tailwinds driving Smith & Wesson Brands’ NASDAQ: SWBI business is a bit of an understatement. The first is America's re-infatuation with outdoor lifestyles, a re-infatuation sparked by the pandemic but no longer tied to it. The second is political. With Democrats in the White House and the threat to the second amendment at a new crescendo gun enthusiast, both new and old are flocking to the gun stores. The data says it all, America has been setting new record levels of gun permits over the past year with record numbers of follow-on purchases as well.

Smith & Wesson Brands Leads The Industry

Smith & Wesson Brands’ fiscal Q4 results prove the power of branding as well as this company's earnings leverage. The company delivered $322.95 million in consolidated revenue for a gain of 67.3% over last year, results not only beat the consensus by nearly 2,500 basis points but that also lead the industry by over 2,500 basis points. 

"Strong consumer preference for our products combined with our ability to rapidly react to the increased demand has placed us in a clear leadership position as we enter into our first full fiscal year as a standalone pure-play firearms company," says CEO Mark Smith.

Moving down the report, the details only get better. The company improved its gross margins by nearly 1300 basis points to exceed the consensus by 400 basis points and drive substantial bottom-line Improvement. On a GAAP basis, net income improved roughly 200% delivering $1.71 in EPS while the adjusted EPS improved roughly 150%. Both the GAAP and adjusted earnings beat the consensus by wide margins, GAAP earnings by $0.75, and adjusted earnings by $0.63.

Smith and Wesson Brands Increases Capital Return Allocations

Smith & Wesson Brands is putting its success to good use by repurchasing shares and paying a dividend. The company just announced a new $50 million share repurchase program as well as a 60% increase to the quarterly dividend. The new distribution of $0.08 per share, quarterly, equates to about 1.6% in yield while the repurchase program is worth about 4.5% of the market cap.

“During fiscal 2021, we invested in our business and our people, we repaid all of our bank debt, we repurchased over 10% of our outstanding common stock, and we began paying our stockholders a quarterly dividend for the first time in company history.  Continuing with our capital allocation strategy, I am pleased to announce that our Board has authorized a new $50 million share repurchase program as well as a 60% increase in our quarterly dividend to 8 cents per share,” Says Deana McPherson,  Executive Vice President, and CFO.

The Technical Outlook: Smith & Wesson Brands Shoots Higher

Shares of Smith & Wesson brands are up more than 5% in the pre-market session following the release of the Q4 earnings report. The move reverses the loss posted in the prior session and brings price action back above the short-term moving average. If the price of action can maintain the upward momentum we expect to see the stock retesting the recent highs very soon. A move above the $22 level would be very bullish and could lead to a significant multiple expansion, the stock is insanely cheap at only 8 times its forward earnings estimate.