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Sturm, Ruger & Co. Inc. Message Board

  • captainwho2 captainwho2 Apr 22, 2013 12:54 AM Flag

    Why blowout NICS numbers are anything BUT irrelevant (for those who may be confused)

    1) First, there were some recent "milestones" for the Adj. NICS:
    a) All time high Adj. NICS for month of Dec 2012 of 2.237,731. This was also an all-time high at the time for YoY Adj. NICS Growth of +58.6% (soon to be surpassed in the next month of Jan 2013)
    b) All time high YoY Adj. NICS Growth in Jan 2013 of +94.4% (almost a double).
    c) All time high Quarterly YoY Adj. NICS Growth in Q1 2013 of +45.9%.

    2) Important fact to understand first: All major manufacturers of guns started off Q1 '13 on the equal footing of having stripped inventories on the distributor and retail level. Just read some of the news stories of reports from gun store owners for proof of that. From then on, it was a race between the various manufacturers to produce as fast as possible so as to better keep up with demand compared to their competition. Whoever managed to do that was able to grow their market share, even if only for the quarter. We will have to wait and see for that.

    3) Adjusted NICS figures are generally accepted as the best method for analysts to gauge gun demand growth for the gun industry, short of actual sales volume data from each manufacturer, and the entire industry.

    4) Ruger has stated many times that they feel that their ability in recent quarters and years to attain YoY Quarterly Revenue Growth that has been EXCEEDING the YoY Adj. NICS Growth figures means that they have been TAKING market share from some of the competition. With this knowledge firmly in hand, and the positive trend of blowout NICS numbers indicating huge growth trend for the industry as a whole, they have been confidently engaging in ongoing improvements to their production capacity through capex.

    5) By looking at the monthly NICS data that comes out within a given quarter, each company (such as Ruger) can compare this to their known partial quarter sales data and determine if they are gaining or losing market share within that quarter. This gives them an idea (cont.)

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    • 5) cont.) of what they want to do in the area of even further capex for production expansion which of course has potential risk for any company, if the growth of gun demand should be about to soon peak and possibly recede.

      6) So when all manufacturers are starting out with stripped inventories and building ever larger backlogs, it's all about expanding production the right amount to maintain or continue to take market share, while properly balancing that against the risk of a peak and retraction of gun sales growth.

      7) Nobody should be able to say that the NICS numbers are irrelevant, just because RGR has a backlog situation due to the reasons given above. Here is some spreadsheet data I posted in another post, showing how RGR has been beating the Adj. NICS Growth the past 7 quarters, and how analysts are low-balling their estimates for Q1:

      Quarter___Price___EPS___P/E___EPS Growth YoY___Adj. NICS Growth YoY___Rev___Rev Growth YoY

      Q1 '13___ $50.73___1.01 est___13.3 est___+27.8% est___+45.9%___131.65M est___+17.2% est
      Q4 '12___$45.40______1.02___12.6_______+88.9%_____+41.2%____$141.8M_____+52.1%
      Q3 '12___$49.49______0.88___15.9_______+57.1%_____+22.3%____$118.2M_____+46.8%
      Q2 '12___$40.15______0.91___14.3_______+62.5%_____+17.9%____$119.6M_____+50.2%
      Q1 '12___$49.10______0.79___19.9_______+88.1%_____+23.2%____$112.34M____+49.0%
      Q4 '11___$33.46______0.54___15.9_______+86.2%_____+17.9%____$93.2M______+45.4%
      Q3 '11___$25.98____0.56(0.57)__14.0_____(+78.1%)____+12.1%_____$80.5M_____+37.8%
      Q2 '11___$21.95____0.56(0.57)__13.6_____(+32.6%)____+13.2%_____$79.6M_____+23.6%
      Q1 '11___$22.97______0.42____15.6______-4.5%______+13.0%_____$75.4M_____+10.4%
      Q4 '10___$15.29______0.30____10.3______????_______?????______$64.1M_____?????
      Q3 '10___$13.64______0.32____????______????_______?????______$58.4M_____?????
      Q2 '10___$14.33_____0.43____????______????_______?????______$64.4M_____?????
      Q1 '10___$12.33_____0.44____????______????_______?????______$68.3M_____?????

      • 4 Replies to captainwho2
      • There are five analysts listed in the SEC Form 8-K for Ruger from the February 28 Conference Call.
        1. Scott Hamann-KeyBanc Capital
        2.Brian Rafn-Morgan Dempsey Capital Management
        3.Jim Barrett CL King and Associates
        4.Will Waller-M3 Funds
        5.Chris Harrell-Capco Asset Management

        The published Yahoo estimates for 2013 seem to be based on polling only two unidentified analysts, and the (lowball) earning estimates for 2014 are provided without attribution---lhere were no analysts polled, according to the database, but the estimates are provided nonetheless, and are very low.

        What effect do these analysts have on investors? 90 % of shares are owned by institutions, including pension funds and hedge funds. I assume the hedge funds perform rigorous in-house research. I assume the pension funds are not very discerning, and rely on advisors, who may have a conflict of interest. The retail investors may possibly be influenced by that analysts...... I'm not sure about this, since some retail investors are very cynical..

      • Let us see if we can agree about how to determine whether NICS count mattered for Q1 (I previously have said they did not matter for Q1, I did not say they will never matter).

        I think the proof of which of us is correct will NOT be in the profit amount or the revenue amount. I think the proof will be in the quantity of units sold. I say quantity will rise only a little (some from capacity expansion, and some because there may have been Thanksgiving & Xmas holiday closings in Q4).

        On the other hand, if you are correct then quantity shipped should rise roughly in proportion to NICS increase.

        If you agree, then state now what you calculated as the NICS increase during Q1 vs. during Q4.

      • Good points. I wondered if we might understand why RGR analysts have been so negative, if we understood how they are getting paid. Who is paying them for firearms research? Certainly not retail investors. Why would an analyst who covers twenty different unrelated companies in other industries write research about Ruger?

      • I'm looking for Q1'13 revs closer to 160M, rather than 131M, and rev growth at 40%+. GLTY!

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