Ruger reports earnings next Tuesday. Analysts' consensus is $1.38 per share. Keybanc's Scott Hamann estimates $1.29.
Ruger ships about 550,000 firearms per quarter, and has a 10 month backlog of unfulfilled orders, as follows:
Backlog of orders for Ruger firearms by quarter:
2013Q3: 1.88 million
2012Q3:. 0 91
This implies RGR was able to sell every firearm they were able to manufacture in the fourth quarter. The Mayodan factory was supposed to be full operational by December 2013. It seems reasonable to assume that production must have been at record levels, since there were a maximum of workdays, and three factories instead of two. You'd expect that earnings are going to beat second quarter's record result of $1.63 per quarter, and analysts' consensus of $1.38, by a wide margin.
S+W website contains a webcast for today's presentation at Cowen, and a number of key points were made by Mr. Debney and management team.
The California microstamping law only affects pistols, not revolvers or long guns, and only new models, not models already on the "Roster" in California, such as the M+P Shield.
Inventory shortages?--There are still low inventories of conceal carry products, and rimfire ammo, but not modern sporting rifles, which have had a softening.
Is there pressure to discount prices? We eliminated all discounts except for the consumer--we give a $75 rebate with one of our bolt action rifles, and 300 rounds of .22 ammo with one of our handguns.
How is the ERP rollout going?
In Q2, there were $4 million in one -time costs for the new program.
In Q3, we projected $1.5 million in one-time costs, and in Q4, slightly more.
The rollout is going well, we're past all the start-up problems.
What are the priorities for cash deployment?
Our number 1 priority is to reinvest in our business. This takes the form of capital expenditure. The CAPEX need for maintenance is $20 million annually. Last year, there were growth opportunities, and we spent $40 million. This year, there were more opportunities, and we will spend $60 million. We try to add incremental capacity to meet demand.
If there is any cash left over after CAPEX, our choices are repurchase stock, pay a dividend, or retire debt. At the moment, with interest rates low, and our stock trading a low P/E ratio, it is most advantageous to repurchase shares. This lowers our cost of capital a few percentage points. We currently have a $15 million buyback program in place, and we'll let you know how its going at the next earnings report.
Stifel Nicolaus, Century agree to pay fines
Stifel Nicolaus, Century Securities to pay fines, restitution tied to some ETF recommendations
January 9, 2014 12:50 PM
WASHINGTON (AP) -- Stifel Nicolaus & Co. and Century Securities Associates Inc. have agreed to pay a combined $550,000 in fines and nearly $475,000 in restitution to 65 customers because the firms made poor recommendations on non-traditional exchange-traded funds.
I agree that comparisons between two companies using different fiscal years are problematic.
SWHC has "California compliant" versions of the M&P Shield and the polymer pistols. I don't recall hearing that Ruger has any "California compliant" pistols.
Mr. Debney wants distributor inventory less than 8 weeks, which is almost exactly the same as Mr. Fifer's 6-8 "turns" (52/6=8.7 weeks, 52/8=6.5 weeks).
In Orwell's "Nineteen Eighty-Four" protagonist Winston Smith is enveloped in a totalitarian society where all citizens strive to think orthodox thoughts ("goodthinkers"). Facts needed to be treated with flexibility ("blackwhite.") There is a continuous alteration of the past, made possible by a system of thought known in Newspeak as "doublethink".
Thus it was possible for Ruger to beat 2013 earnings and revenues estimates by a mile, and yet be branded by analysts as "missing" on earnings and revenues.
On January 17, 2013, Ruger traded for $52.56 per share, slightly below present levels. The consensus analyst revenue estimate was $466.65 million for 2013 fiscal year, and the consensus earnings estimate was $3.15 per share. As events unfolded, Ruger FY2013 revenues were $688 million and EPS=$5.58. This was roughly 50% above consensus, but it has been portrayed as a catastrophe. This is an example of "blackwhite" treatment of facts, and the analysts are the orthodox thinkers ("goodthinkers.")
Today's analyst consensus for Ruger predicts earnings for the first quarter of $1.12/share, and revenue of $157 million. This is ridiculous on its face, because Ruger is sold out 8 months in advance and will ship a full quota of firearms during the quarter. Last quarter revenues were $182 million, on the same level of firearms shipments. Why would they suddenly drop off in the first quarter, with sold-out production?
This is part of the haze of propaganda published by "orthodox" thinkers, including firearm analysts, from the Ministry of Truth. They hope to see poor revenues and earnings ("goodthink"). If worse comes to worse, they can always raise estimates one day before earnings are published, generating an earnings and revenue miss ("blackwhite" treatment of facts, and alteration of the past, "doublethink".)
Hi there, vkncaa,
As a serious investor, I'm sure you buy stocks based on the net present value of their future earnings stream. Therefore, you no doubt have an earnings estimate for Ruger, which reports in two weeks. Why don't you put up your estimate on the message board here?
(My own estimate, which I mentioned before, is $1.63 EPS for the fourth quarter, or about $6 EPS for the FY2013.)
Ruger is on sale today, at 12.7x earnings, which I estimate at $5.90 for 2013, versus a share price of $75.35. Profits are growing 65% per year. Revenues a bit slower, only 49% trailing twelve months. I believe today's price is a pretty good value, based on fundamentals.
Cabella's results were worse than NSSF data would predict. In January 2012, adj NICS were 920.840. In January 2014, adj NICS were 970,510, or +5.3%. But Cablella's comps were flat for the same time period for firearms. This lagging performance prompted one analyst to ask if Cabella's were losing market share. This is when management gave a long answer, that included comments about modern sporting rifles.
Cabella's said their comp store firearms sales were down 50% this January, but up 100% last January, so that the overall two-year comparison was flat. This means Cabella's sales are highly variable, and reflect the firearms market on an instantaneous basis. Ruger is different, because it can't ramp up production to meet demand, and their shipments of firearms last January grew very slowly compared with NSSF adj NICS. That's why they have the two year back-log, and also why they are going to report extremely strong, and presumably record quarterly earnings, in two weeks.
I see you're still posting "whisper numbers", even though you wrote your "last message on the board".
Now you're publishing false statistics. You said, "demand almost tripled since 2006..." But Total NICS background checks in 2006 were 10.0 million. In 2013 they were 21.1 million. That's actually double, not triple. Even compared with 1998 levels, NICS have not tripled. And 2013 was a statistic outlier, a surge year. Perhaps you mean that firearms revenues have tripled, measured in US dollars without accounting for inflation.
Also, you suggeste that by reviewing 20 year-old data excise tax data, one gains a more accurate picture of the future. Again, this does not account for inflation.
Also, the tests you have proposed for evaluating Ruger are extreme. What if market demand collapsed by 50%? Name one business that would be able to maintain profits if demand collapsed by 50%. Why not look at the converse, what if demand doubled next year?
Also, I noticed you display a lot of sympathy for Scott Hamann. His research is "very thorough". Maybe we might consider "subscribing to his research". Michael Fifer was very rude to Scott in the conference call, when Scott was talking about the "cadence of revenues" and Mr. Fifer asked him to be more specific. Scott is a very detailed guy who looks at 20 year- old excise tax data.
I am not convinced you are not Scott Hamann. You are an equity analyst, like Scott. You don't consider earnings or revenues important. You have very detailed knowledge of statistical minutiae, like the excise tax rate for firearms 20 years ago. You seem to believe that all firearm demand is based on right-wing extremists protecting themselves from Democrats, and demand will collapse if Republicans win the Senate. Overall, your arguments don't hold together very well, and remind me of Scott..
Extremely high CAPEX expenditure. Total CAPEX for year was $54.6 million, versus $27.3 million in 2012. Most of the CAPEX came in the fourth quarter, probably because of the purchase and outfitting of the Mayodan facility. Next year, CAPEX projected at approximately $35 million by management.
The third change is the most important. It wouldn't be much of a stretch to go from storing the names of gun purchasers who had been denied to the names of people who had been approved. Then you'd have the database you always wanted.
Economist article cited is based on U. Chicago General Social Survey (GSS) data, which shows 35% of American households own gun. Other surveys show a larger percentage. For example, image search using Google: Percentage of households with guns GSS vs. telephone survey. The second image is a graph showing telephone survey results, compared with GSS survey results, 47% vs. 35%. It is very difficult to estimate how many households own firearms.
I am up to my eyeballs in Ruger shares. Here's my theory:
Trailing twelve month earnings are $5.28. Fourth quarter earnings are likely to be roughly $1.63 (similar to Q2) and certainly better than Q2 $1.44, because of the number of workdays and the scheduled vacations during autumn hunting season.. Last year's comparison in the 2012 Q4 was $1.01, so I estimate Ruger will beat last year by about $0.62 in the worst case. That means 2013 EPS=$5.90.
At today's price, $77.67 per share, the P/E ratio is 77.67/5.90=13.2x. Earnings growth rate is 65% per year, far faster than adj NICS growth rate of 9% because of various efficiencies introduced to operations by CEO Michael Fifer. These include relocating manufacturing to Mayodan, in a right-to-work state, and using part-time workers when possible, and shrinking the Board of Directors, and freezing the defined benefit pension plan. Also Mr. Fifer exacted incentives from North Carolina and Mayodan in return for bringing jobs there.
Buyers are scared off by the elaborate hoax created by Scott Hamann and others, who are working in concert. That keeps the P/E ratio low, but does not alter the arithmetic of buying a low P/E, high growth stock.
It is estimated there are 300 million to 400 million firearms in the U.S., and 90 million firearms owners. (Brian Rafn interview on CNN). There are 210 million people who do not own firearms, and there are people like me who own nothing more than a .22 Walther P-22, and would like to move up. I will need to get my wife's permission.
People are getting older, and need firearms to defend their homes and businesses from intruders, who are growing bolder. There was a great surge in interest in weapons after Hurricane Katrina, and the looting and vandalism in New Orleans.
Ruger is a great company, with great earnings, a great balance sheet, and great prospects. However, investors are day-trading it because of nervous energy, manic-depressive urges and compulsions. Sooner or later, fundamentals will be reflected in the share price, which is presently only 12x estimated 2013 earnings of $5.90/share. When a stock is growing 65% annually, there's no need to wait very long.
Thanks, akitasrbad. You have a much deeper insight than most of the rest of us due to your unique situation.
Cabella's management said in the CC comp store sales for firearms were down 50% in January, if I heard correctly. I wonder how much of that reflects plunging sales of modern sporting rifles? Ruger is more of a handgun manufacturer, and we know from the January NICS data that overall firearms sales, measured by units sold, was quite strong in January.