Wunderlich Analysts Have Smith & Wesson Acquisitions In Their Sights

Soon after it announced its intention to acquire Taylor Brands LLC, Smith & Wesson Holding Corp (NASDAQ: SWHC) announced on July 25 that it had reached a definite agreement to acquire Crimson Trace.

Wunderlich’s Rommel Dionisio maintains a Buy rating on Smith & Wesson, with a price target of $34.

The Deal

Dionisio mentioned that Crimson Trace is an industry leader in the rapidly growing laser sighting and targeting systems category for firearms.

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“This acquisition is not only expected to be accretive to FY17 EPS, but also further diversifies the company’s product portfolio in the outdoor recreational and sporting goods sector,” the analyst stated.

The total purchase price is $85 million, with Smith & Wesson utilizing cash on hand to fund the deal.

Future Accretion

Crimson Trace’s trailing 10-year sales CAGR was more than 10 percent, while its trailing 12-month revenue was $44 million, about 25 percent of which is contributed by Smith & Wesson, since the latter company features Crimson Trace’s laser sights in its Bodyguard line of concealed carry handguns.

Diosinio pointed out that this transaction, therefore, also includes “an element of vertical integration.”

While the acquisition is expected to be accretive to the FY17 EPS, longer term, the analyst believes that Crimson Trace could “significantly benefit from Smith & Wesson’s powerful distribution platform of distributors, firearms dealers, and sporting goods retailers.”

The FY17 revenue and EPS estimates have been raised to reflect the Crimson Trace acquisition.

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