Sturm Ruger Profit at 25-Year High on Rising Gun Demand
Sturm Ruger & Co. (RGR) posted the highest yearly profit since at least 1987 as speculation that the U.S. would regulate guns more strictly spurred record firearms demand.
Net income increased to $70.6 million, or $3.60 a share, in 2012 from about $40 million, or $2.09, a year earlier, the Southport, Connecticut-based company said in a regulatory filing yesterday. That topped the $3.41 average estimate of analysts in a Bloomberg survey.
Sturm Ruger, the second-largest publicly traded U.S. firearms-maker by sales, and rival Smith & Wesson Holding Corp. (SWHC) are benefiting from the re-election of President Barack Obama and his push to tighten gun laws after an elementary school massacre in Newtown, Connecticut. Buyers have increased purchases amid concerns that such laws will curb availability.
“People are willing to pay whatever it is at this point in time” to buy guns, Peter Zeuli, chief investment officer at Voorhees, New Jersey-based Philadelphia Investment Partners LLC, said in a telephone interview. Zeuli’s firm manages about $125 million, including Sturm Ruger stock.
Sturm Ruger has gained 18 percent this year through yesterday, after slumping 15 percent over the three trading sessions following the Newtown shootings, which left 28 dead.
The shares fell 1.8 percent to $52.56 at 11:29 a.m. in New York after Chief Executive Officer Michael Fifer declined to give a forecast for 2013 results during an earnings call. An earlier drop of 5.4 percent was the largest on an intraday basis since Feb. 11.
“The forward-looking part, I’m not going to answer at all,” Fifer said on the call. “So just completely forget that.”
Zeuli said afterward that the surge in profit may not be sustainable.
“You’re going to see a more normalized growth rate,” he said. “When you book a sale, the sale is booked. Basically, that person is not going to buy again for a while. What’s the life expectancy of a gun or a pistol? It’s pretty long.”
Revenue at the gunmaker rose 50 percent to $491.8 million in 2012, trumping the average estimate of analysts by about $20 million.
Sales in the fourth quarter climbed to $141.8 million, the highest since at least 1990. The period included both Obama’s re-election and the Connecticut massacre, and the data help quantify just how lucrative the spike in gun demand has been for manufacturers.
Pre-purchase background checks hit a record high in December, climbing almost 59 percent from a year earlier to 2.2 million, according to federal data adjusted by the Newtown-based National Shooting Sports Foundation to eliminate checks not related to sales. The previous record was set in November, the month Obama was re-elected, the industry group’s data show.
There were 13.8 million background checks in 2012, up 28 percent from 2011, according to the foundation. Sales growth at Sturm Ruger outpaced the jump in background checks on both an annual and quarterly basis, the company said yesterday.
“The reason why gun sales expanded was because of what people thought -- that there would be some more gun laws on the books and plus, people wanted to protect themselves,” Zeuli said. “It was an emotional purchase.”
After the Newtown shootings, the president proposed measures including universal background checks and banning military-style weapons sold by both Sturm Ruger and Smith & Wesson.
“All of us at Ruger are deeply saddened by the horrible criminal events that took place in Newtown,” Fifer said today. “We have employees who live around Newtown who have family, friends and acquaintances that were affected. Our thoughts and prayers go out to those families and to the victims.”
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