Are Gun Companies Still Shooting the Lights Out?

 
on March 06 2013 12:21 PM
Guns
The three most common suicide mechanisms for middle-age people are firearms, poisoning and suffocation, according to a CDC report. Reuters

In another sign the current administration is the best thing to happen to gun sales since the Second Amendment, Smith & Wesson Holding Corp.

After Tuesday’s closing bell, the second largest publicly-traded gun manufacturer reported net sales of $136.2 million for its fiscal 2013 third-quarter, up 38.8 percent from a year earlier. Net income from continuing operations came in at $17.5 million (26 cents per share), compared to $5.4 million (8 cents per share) in the same period last year. Analysts were expecting earnings of 23 cents per share with $133.7 million in revenue.

James Debney, president and chief executive officer, explains in a press release, “Our success in the third-quarter was highlighted by significant year-over-year improvements in net sales, margin expansion, and bottom line profitability as we successfully executed our growth strategy, which is underpinned with a focus on firearms.  Performance gains were driven by continued robust consumer demand for firearms.”

With strong demand and profit margins improving, Smith & Wesson also raised its guidance. For the current quarter, it expects to earn between 38 cents and 40 cents per share, above analysts’ estimates of 30 cents per share. The company expects net sales from continuing operations to come in between $575 million and $580 million for fiscal 2013.

As the chart below from Smith & Wesson shows, background checks for February were down from January, but 29.1 percent higher from a year earlier. According to an analysis of the gun industry by The Associated Press, the federal government has conducted roughly the same number of background checks for gun owners and prospective buyers under Obama’s first term, as it did under George W. Bush’s first six years of presidency. For the first time since 1993, the number of federally licensed retail gun dealers in the U.S. increased in 2010 and 2011, adding 1,167 more licensed dealers.

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The gun industry typically receives a boost when a Democrat holds the White House, but gun and ammo sales have surged in recent months as the tragedy in Newtown sparked more debate about gun control. In January, President Barack Obama and Vice President Joe Biden rolled out a wide-ranging list of executive actions regarding the issue. Furthermore, Obama called on Congress to: ban military-style assault weapons, ban capacities of more than 10 rounds, require background checks on all gun sales, and create tougher penalties for those selling guns to people who are not legally allowed to have them.

Here’s a look at some popular gun-related stocks.

Sturm, Ruger & Co. (NYSE:RGR):

Last week, the largest publicly-traded gun manufacturer also reported impressive quarterly results. Net sales came in at $141.8 million for the fourth-quarter, up 52 percent from $93.2 million a year earlier. Earnings were $1.00 per share, compared to only 54 cents per share in the fourth-quarter of 2011. On average, analysts were expecting earnings of 94 cents per share with revenue of $124 million.

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Wal-Mart (NYSE:WMT):

The world’s largest retailer also finds itself exposed to the gun industry. In January, Wal-Mart placed a limit on ammunition sales of three boxes per customer, per day.

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“Right now we’re monitoring supply issues daily, since supply is limited at this time,” said Ashley Hardie, a Wal-Mart spokeswoman. “We’re trying to take care of as many customers as possible and we’re working with suppliers to put products back on shelves.”

Cabela’s (NYSE:CAB):

One of the most well-known outdoor recreation brands in the world, reported quarterly results in February. The company also noted a boost in sales due to recent gun control debate.

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“Every area of our company performed at very high levels in the fourth quarter,” said Tommy Millner, Cabela’s Chief Executive Officer. “Sales and profit per square foot at our next-generation stores were 40 percent higher than our legacy stores. comparable store sales, aided by a surge in firearms and ammunition, increased 12.0 percent, a new record, and our Direct business grew 1.7 percent, the first increase in 11 quarters.”

Retailer Big 5 Sporting Goods (NASDAQ:BGFV) also noted that its quarterly results received help from “the well-publicized national increase in demand for firearms and ammunition products.”

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