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Sturm Ruger Jumps as ‘Political Environment’ Keeps Demand High

A Ruger 22/45 Lite Rimfire Pistol. (Photo: Sturm, Ruger & Co., Inc.)
A Ruger 22/45 Lite Rimfire Pistol. (Photo: Sturm, Ruger & Co., Inc.)

Sturm Ruger & Co. (RGR) shares were on the rise Thursday after the gun maker said demand has remained intense for pistols and rifles, in part because of the threat that stricter legislation could still pose to the firearms industry.

Following the close of trading Wednesday, the Southport, Conn.-based company reported sales of $179.5 million in the second quarter, a 50% increase from the same period a year ago when revenue totaled $119.6 million. The showing on the top line indicated stout product sales -- Bloomberg data that go back to 1990 turned up no quarters in which sales were higher. Sturm Ruger earned $1.63 a share, up from 91 cents a year prior.

FactSet carries only one analyst's estimates, but according to the available forecasts, the expectation was for sales of $154.7 million with a profit of $1.18. Shares recently were up 5.3% at $53.54 on heavier-than-normal volume. The stock had reached $55.28 earlier in the morning, an 8.7% rise from the last close.

Gold chart
Gold chart

New products, such as the LC380 and SR45 pistols, helped lift sales for the first half of 2013, accounting for nearly one-third of the revenue Sturm Ruger has recorded since the start of the year. The company also makes revolvers, like the GP100 line, and rifles, including the popular 10/22 and Mini-14.

Still, the better part of the interest in Ruger firearms likely came from the continuing uncertainty about the extent to which lawmakers will pursue gun-control measures, the company suggested. In a regulatory filing accompanying its quarterly results, Sturm Ruger said it believed the "strong demand for our products was primarily due to the current political environment that favorably impacted the entire firearms industry."

Along with its new guns, Sturm Ruger said first-time firearms buyers and higher manufacturing output contributed to the sales gains for the most recent quarter. "During the second quarter and first half of 2013, the estimated unit sell-through of our products from the independent distributors to retailers increased 37% and 23% from the comparable prior year periods. Insufficient distributor inventory at December 31, 2012 severely limited the estimated sell-through from independent distributors to retailers in the first half of 2013," the company said in prepared remarks.

Distributor inventory levels still are below what's "optimal" for quickly meeting heightened demand at gun counters, the company said. For the second quarter, distributors' sales to retail gun sellers was estimated at 560,200 firearms, up from 410,300 in the same quarter in 2012.

That said, Sturm Ruger added on a conference call that while it hasn't seen a decrease in the want for its guns, it has "heard anecdotally that the normal seasonal slowdown is starting" and that "more normalized growth" is probable, according to a CNNMoney report.

And it may be that some prospective gun buyers don't feel quite as pressured today as they did only months ago to make purchases immediately, considering the gun-control movement's lack of momentum in recent months. Using data adjusted by the National Shooting Sports Foundation, Sturm Ruger said background checks via the National Instant Criminal Background Check System rose 15.8% from last year to 3.03 million in the quarter. However, that was down 38.4% from the first quarter of this year, when 4.93 million checks were run through NICS.

The December school shooting in Newtown, Conn., that left 20 students dead raised the public interest in the gun debate considerably, but daily press coverage of the issue has dropped off of late. Additionally, even as some states such as New York and Colorado have put restrictions on gun buys, a White House-backed effort to write new firearms laws was beaten in the Senate this spring. Also, gun owners in Illinois were granted the right last month to apply for permits to carry concealed weapons, making it the last state to pass a measure of that nature.

In June, Sturm Ruger competitor Smith & Wesson (SWHC) reported that its sales for the fiscal fourth quarter were $178.7 million, a 37.6% year-over-year climb. At current levels, Sturm Ruger's shares have advanced 19.9% from where they ended last year. Smith & Wesson has risen 42.8%.