Smith & Wesson: Running Out of Ammunition for 2017?

We’re reiterating our Buy rating on Smith and Wesson but have trimmed our target price to $25 from $30 due to disappointing margin guidance for Fiscal 2017. Our WACC forecast has also been increased by 1.8% due to the likelihood of additional debt to fund acquisitions. Our 3Q17 adjusted EPS estimate has been reduced by a nickel, and our revenue forecast was lowered by $3.9M. Our FY17 and FY18 earnings and revenue estimates have been cut, too. (See end of report.)