Amid talks of tighter gun control and a series of tragic shootings, a pickup in demand for firearms is expected to drive double-digit gains in both sales and profits for Smith & Wesson's fiscal first quarter.
After seeing slower demand in May, "The past two months have seen a dramatic surge in U.S. firearms sales, particularly in rifles," Wunderlich Securities analyst Rommel Dionisio said in a research note.
Adjusted gun background checks, frequently used as a proxy for retail gun sales, soared approximately 28 percent in July, to just over 1.21 million. The adjusted figures released by National Shooting Sports Foundation also show June and July totals were records for those months.
"The gun industry has not had a chance to catch its breath amid the current buying frenzy," C.L. King & Associates analyst Scott Stember wrote in a report this week. "As seen in prior cycles, one could even argue that the severity of the pullback will worsen if the current surge continues."
Smith & Wesson is scheduled to report results Thursday for the three months ended July. Analysts polled by Thomson Reuters forecast the company's earnings will jump 65 percent, to 53 cents per share. Revenue is projected to rise 34 percent, to $198 million.
The company has a track record of beating Wall Street estimates, sometimes sending the stock soaring. Its shares have already been on a tear over the past 12 months, rising 56 percent in value.
In the firearms segment, Stember predicts the company's handgun and long gun revenue will each jump 40 percent, reflecting "surging industrywide demand for smaller concealable pistols and MSRs (modern sporting rifles) in the aftermath of recent mass shootings, as well as from new product offerings."
The accessories segment, a smaller but growing business for the company, is forecast to show a 20 percent revenue increase, according to Stember. Still, industry conditions provide some concern for the division, as competitor Vista Outdoor just commented on slowing accessory sales. It cited "industry-wide inventory consolidations," due to recent customer bankruptcies, as well as "general retail weakness."
There are also signs the gun sales rush may be slowing.
"While August continues to pace well ahead of last year, the sales surge has begun to slow among our contacts," Wedbush Securities analyst James Hardiman said in a recent note. The firm's findings were based on channel checks of more than 30 big-box and independent firearms sellers across the nation.
A deceleration in gun sales from the strong June and July pace wouldn't be entirely surprising, but "part of the slowdown among our contacts has been driven by lack of availability of the most popular models," the analyst said.
Wedbush's contacts have reported a need for more of Smith & Wesson's M&P Shield pistols and M&P Sport rifles. Smith & Wesson did not respond to CNBC's request for comment.
"While some sales were potentially lost for good, the nature of the cadence of news-driven guns sales means it is likely that any sales that were lost due to lack of certain models will be made up in the next surge," Hardiman said.
Overall, the gun industry maybe struggling to keep up with demand after June's mass shootings in Orlando and political talk about gun control this election season. That is in sharp contrast with two years ago, when an industry-wide glut impacted gun makers and retailers.
Meanwhile, Smith & Wesson has embarked on a diversification plan. It completed in August the acquisition of two accessories manufacturers for $180 million in cash. The company acquired Crimson Trace, a laser sighting systems and tactical lighting company, and Taylor Brands, maker of a line of knives and specialty tools.
Earlier deals included Battenfeld Technologies, a hunting and shooting accessories company it bought for $130.5 million in late 2014, and two "tuck-in" acquisitions: Hooyman Saws, a company that makes extendable tree saws used in hunting, and PowerTech, a flashlight business acquired earlier this year.
"The little tuck-in acquisitions will pay back very favorably to the performance of the accessories division," Smith & Wesson CEO James Debney said on the company's latest earnings call. "We would like to acquire larger businesses that are a fit with us, obviously meet our financial criteria or they are a fit in terms of the spaces that we want to explore, such as the rugged outdoors."
Yet CFO Jeffrey Buchanan drew a line earlier this year when asked if Smith & Wesson's outdoors space could include apparel.
"It's no Smith & Wesson hiking boots, fishing rolls, sleeping bags, tents or anything like that," he said.