Investors are watching earnings from firearms maker Smith & Wesson (NASDAQ: SWHC), which is due to report fiscal second-quarter results after the closing bell Tuesday.
Gun sales typically spike after episodes of high-profile gun violence, and early indications are that the trend is happening again following recent terror attacks in San Bernardino and Paris. The quarter to being reported Tuesday won't include any sales spike that results from the most recent attacks, but Wall Street foresees a strong quarter for Smith & Wesson regardless.
The Springfield, Massachusetts-based gunmaker has beaten analyst consensus forecasts each of the past four quarters, and analysts say recent background check data show there was strength not only in handguns but rifles, which have higher margins.
For the quarter that ended Oct. 31, Smith & Wesson's earnings per share are forecast to more than double to 20 cents a share, according to analysts polled by Thomson Reuters, up from per-share earnings of 9 cents in the year-earlier period. Revenue is projected to rise 28 percent to $139 million.
Investors on the earnings conference call will be looking for projections about November and December trends and to see whether the company raises revenue and earnings guidance again for the full fiscal year ending in April 2016. Reports indicate that Black Friday , the traditionally strong retail sales day that follows Thanksgiving, set a record for most firearms background checks in a single day .
"Gun business is good," said Jeff Bregman, owner of American Gun Works in Glendale, California, 60 miles west of San Bernardino. "The firearms industry has always remained fairly steady in America. I'm not surprised that it's held up against the recession."
Smith & Wesson's stock has more than doubled so far this year and was up last week, along with rival gunmaker Sturm Ruger (NYSE: RGR), after the mass shooting in San Bernardino on Wednesday. The terrorists in San Bernardino were armed with firearms made by Smith & Wesson, and the massacre that killed 14 people has renewed calls by some politicians for tougher gun laws.
"People are running out to try to get guns because they recognize that the politicians are trying to take guns away from them," said Joseph Cornell, a gun dealer in Denver. Such fears on the part of consumers may explain previous sales spikes, though recent history has shown that U.S. mass shootings have not resulted in stricter federal gun laws.
Smith & Wesson's handguns represented about three-quarters of its firearms revenue in the most recent quarter.