Smith & Wesson Gun Sales Soar as Obama Announces Gun Rules

Inside Pres. Obama's Speech on Gun Control
  • Gunmaker increases quarterly sales forecast by 16 percent
  • President announces executive actions to expand federal checks

Smith & Wesson Holding Corp. rose to its highest value ever after raising its forecast for gun sales as President Barack Obama announced new restrictions on arms sales.

The maker of handguns said revenue for the quarter ending Jan. 31 may be as high as $180 million, a 16 percent increase from its forecast given in December. Gun sales surged last month as discussion of weapons restrictions heated up after a terrorist shooting in San Bernardino, California, left 14 dead. 

Concern over more gun regulation isn’t the only thing driving sales. People also are buying weapons for personal safety after two shooters opened fire at an employee holiday gathering last month at a San Bernardino public health facility, said Chris Krueger, an analyst with Lake Street Capital Markets LLC. The last large increase in demand occurred after the Sandy Hook Elementary School shooting in Newtown, Connecticut, in which 20 children and six adults were killed.

“Three years ago after Newtown, it was primarily the gun-control factor,” Krueger said. “This time it’s a combination of personal protection and gun control.”

Smith & Wesson rose 11 percent to $25.86 at the close in New York, the highest value since the shares began trading in February 1999. Sturm Ruger Co., the largest U.S. gunmaker, climbed 6.8 percent to $65.54.

Higher Sales

Sales at distributors has been stronger than originally anticipated, resulting in reduced inventories, Smith & Wesson said in a statement on Monday after the market closed.

In December, adjusted background checks showed a 38 percent increase from a year earlier, Krueger said. FBI background checks are the best proxy for gun sales because there are about 200 manufacturers, most of whom are closely held.

Obama unveiled executive actions that will extend background checks, including tougher rules for purchases at gun shows and on the Internet.

The expanded checks likely won’t affect the average gun buyer who purchases a weapon at a store, Krueger said. The concern that such measures are only a first step to more regulation, coupled with heightened gun-control discussion during an election year, probably will drive sales higher throughout 2016, he said.

“The political environment at times has helped sales,” Krueger said.

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