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Smith & Wesson Declines Amid Speculation Over Gun Control

Smith & Wesson Leads Firearm Makers Drop Amid Gun-Control Talks
Shares of Smith & Wesson plunged 4.1 percent to $8.76 at 11:26 a.m. in New York, extending the drop to 8.2 percent over two days after the Dec. 14 Connecticut school shooting. Photographer: JB Reed/Bloomberg

Smith & Wesson Holding Corp. led a decline in stocks of firearms makers amid speculation President Barack Obama will renew a ban on assault weapons following last week’s elementary school shooting that left 20 children dead.

Smith & Wesson dropped 5.2 percent to $8.66 at the close in New York, extending its slide to 9.3 percent over two days after the Dec. 14 massacre. Sturm Ruger & Co. has fallen 7.8 percent during the period, while Cabela’s Inc., an outdoor-gear retailer that sells guns and ammunition, slumped 7.3 percent.

The killings by a gunman armed with two pistols and a semi-automatic rifle reignited a debate over firearms restrictions. Obama pledged yesterday to use “whatever power” he holds to prevent such crimes, while Senator Joe Manchin, a West Virginia Democrat backed by the National Rifle Association, said it would be “wrong” to take gun limitations off the table.

“Every time one of these tragic events occurs, there’s certainly a flurry of discussion over whether or not the government may tighten gun-control legislation,” Rommel Dionisio, a Wedbush Inc. analyst, said by telephone. Last week’s slayings may be viewed differently because of “the use of what can be considered an assault rifle and certainly the number of children, and the fact that it was very young children.”

Obama “intends to get the ball rolling,” said Dionisio, who is based in New York and rates Smith & Wesson stock neutral.

Firearm Focus

Authorities found a Bushmaster .223-caliber semi-automatic rifle inside the Newtown, Connecticut, school after the massacre, State Police Lieutenant Paul Vance said yesterday. Bushmaster is one of the brands of Freedom Group, which is the largest U.S. maker of civilian arms and is owned by private-equity firm Cerberus Capital Management LP.

Smith & Wesson and Strum Ruger sell similar military-style weapons, according to their websites.

Firearms accounted for 96 percent of fiscal 2012 revenue at Smith & Wesson, according to data compiled by Bloomberg. The stock of the Springfield, Massachusetts-based company has almost doubled this year, while Southport, Connecticut-based Sturm Ruger has gained 31.5 percent to $44. Both make handguns as well as rifles that include semi-automatic models.

Retailer Declines

Cabela’s dropped 6.2 percent to $41.21 today. That pared the year-to-date gain for the Sidney, Nebraska-based retailer to 62 percent.

Representatives from Smith & Wesson, Sturm Ruger, Cabela’s and National Shooting Sports Foundation, a firearms-industry trade group, didn’t immediately return phone messages seeking comment. Phone and e-mail messages to Peter Duda, a spokesman for Cerberus at Weber Shandwick, went unanswered.

The massacre at Sandy Hook Elementary School was the second-biggest fatal mass shooting in the U.S. as the gunman killed the children, age 6 and 7, as well as six adults. Manchin, the NRA-backed senator, said the nation needed to consider gun control measures following the crime.

“Everything should be on the table,” Manchin, who had just returned from deer hunting with his family, said today in an interview on MSNBC. “We need to sit down and have a common-sense discussion and move in a reasonable way.”

During the Oct. 16 presidential debate, Obama broached the idea of renewing an assault-weapons ban that lapsed in 2004, 10 years after being championed by President Bill Clinton. Senator Dianne Feinstein, a California Democrat who sponsored the original bill, said yesterday she will introduce legislation outlawing assault weapons on the first day of the new Congress in January.

1994 Ban

The 1994 ban included 19 semi-automatic military-style weapons and also prohibited the manufacture and sale of magazines that can hold more than 10 rounds.

A similar ban would have a “noticeable impact” on companies like Smith & Wesson and Sturm Ruger, said Dionisio, the Wedbush analyst.

“Up until the actual date that the law took effect, people would be flooding into stores to purchase a certain type of firearm,” he said. “But then of course, it would be banned.”

A reinstatement of the 1994 measure would also extend to the Bushmaster rifle that was used in the Connecticut slayings. After shelving a planned public offering last year, Freedom Group last month projected a surge in sales.

“In many areas, the market is expanding quicker than the industry can increase production,” Madison, North Carolina-based Freedom Group said in a Nov. 15 regulatory filing. “The continued economic uncertainty and the outcome of the 2012 presidential election is likely to continue to spur both firearms and ammunition sales.”

Freedom Group’s brands include gunmakers Remington Arms Co. and Marlin Firearms Co. and Barnes Bullets.

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