Sturm Ruger & Co Inc. (
RGR
)
Being a Texan, I can appreciate a dependable, durable and
quality gun; fortunately for Sturm Ruger & Co, Texans aren't
the only ones who share that sentiment. In fact, RGR had to
stop taking new orders earlier in the year just to catch up on the
demand that had been building for months.
Just last month RGR announced that it had received orders for
more than 1 million units in the first quarter alone, the
company noted that "despite efforts to increase production rates,
the incoming order rate exceeds our capacity to rapidly fulfill
these orders." I'd say that's a good problem to have…
Many gun manufacturers have enjoyed similar demand even through
the recession and beyond. Smith & Wesson, Sturm Ruger and
other have seen demand growing almost constantly since 2008,
sparked by economic uncertainty and worries that Barack Obama might
seek to reduce gun rights in America. I remember hearing a
talk roughly a year ago where the speaker told the audience to "buy
puts and bullets." (Put options are a bet that stocks will move
lower)
Maybe the masses are heeding that advice and also purchasing
firearms to put the bullets into.
Company Description & Developments
Sturm, Ruger & Co., Inc. opened for business back in 1949 with
only $50,000 in financing. The company is principally
engaged in the design, manufacture, and sale of firearms and
precision metal investment castings. They are the only U.S.
firearms manufacturer which offers products in all four industry
categories.
Firearms produced include single-shot, auto-loading,
bolt-action, lever action, and muzzle-loading rifles in a range of
hunting calibers and shotguns in three gauges, they also
manufacture .22 caliber rimfire auto-loading pistols and centerfire
semi-automatic pistols in various calibers; single and
double-action, and muzzleloading revolvers.
RGR has beat the Zacks Consensus Estimate in seven of the last
seven quarters; even more impressive is the fact that the strength
and magnitude of those earnings are increasing (on average) along
the way. They also throw off a dividend yield of over
1.5%
Financial Profile
RGR is a small-cap (1.06 billion) company that is trading at about
20 times forward expectations for next quarter) earnings. RGR
became a Zacks Rank 1 Strong Buy on January 14th after their strong
Q4 results.
Sturm Ruger's earnings nearly doubled from the first quarter of
2011, driven by the 49% growth in sales and continuing improvement
in operations and costs.
They also rolled out several new models, which were a
significant contributor to sales growth as new product sales
represented $40.8 million or 37% of sales in Q1 2012.
New product introductions in the first quarter of 2012
included:
- Ruger American Rifle
- SR22 pistol
- 10/22 Take Down rifle
Earnings Estimates
For Q1 2012, the Company reported net sales of $112.3 million and
fully diluted earnings of 79 cents per share, compared with sales
of $75.4 million and fully diluted earnings of 42 cents per share
in the first quarter of 2011. Zacks consensus Estimates were for 68
cents per share.
Of the 3 analysts who cover RGR, the consensus is for the
company to grow earnings by 30% in the current year (FY2012) and
roughly 6% in FY2013. RGR is expected to earn $2.70 in
FY2012 according to the Zacks Consensus Estimate.
In terms of the magnitude of analyst estimate trends, we are
seeing all of the consensus estimates higher than they were just 30
days ago for the current and next quarters as well as FY2012 and
FY2013.
Market Performance & Technicals
RGR's 52 week performance has been stellar. After
consolidating for several months around the $15-$16 level in late
2010, early 2011, the stock broke out in February 2011 and hasn't
looked back.
Even though it hasn't been a straight shot up from that date,
the stock has maintained price over the 200 day moving average,
which currently stands at $36.14, which is more than $20 away from
the current stock price. As a defensive stock, it may
continue to earn support from investors even if consumer strength
continues to lose steam. Look for strong support at the $46
dollar area.
RGR has exceeded the S&P 500's performance by an astonishing
128% in the past year and almost 23% in the past 3 months.
Strong earnings and continued love from investors pushed RGR ahead
of the S&P by over 7.6% in the past month alone.
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He
is also the Editor in charge of the market-beating
Zacks Whisper Trader Service.
STURM RUGER&CO (RGR): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research