Gun Sales for Sturm Ruger at Post-1990 Peak Rebut Concern
The shares advanced to a four-month high. Second-quarter revenue surged 50 percent to $179.5 million, the Southport, Connecticut-based company said yesterday. That beat the estimate of $155 million from Scott Hamann, a KeyBanc Capital Markets Inc. analyst, who rates the shares underweight.
The largest publicly traded U.S. firearms maker is seeing “true demand” as the federal gun-control push fades, said Randy Bateman, chief investment officer at Columbus, Ohio-based Huntington Asset Advisors Inc., who oversees $15 billion including Sturm Ruger shares. Its annual profit surged to a 25-year high in 2012 as buyers stocked up amid rising momentum for new laws.
“The numbers build confidence all the way around,” Bateman said in a phone interview yesterday. “You have a company that’s exploding on the growth side, so you have a pretty compelling story for a lot of investors.”
Sturm Ruger rose 3.6 percent to $52.69 at the close in New York, the highest price since March 21. The maker of Mini 14 rifles and Redhawk revolvers has advanced 16 percent this year, trailing the 44 percent increase for Smith & Wesson Holding Corp. (SWHC)
The quarterly sales were the highest in data compiled by Bloomberg that begin in 1990. The previous peak was $155.9 million in this year’s first quarter.
“New product sales have been truly outstanding,” Michael Fifer, president and chief executive officer of Sturm Ruger, said on a conference call. They “remain a strong driver of demand.”
New products accounted for $102.7 million, or 31 percent of Sturm Ruger’s firearm sales in the first half of 2013. The company defines new products as those that have been introduced within the past two years and include only major items, such as the LC380 pistol and the SR45 pistol.
The Obama administration’s gun-control push after the Dec. 14 slayings of 26 people at Sandy Hook Elementary School in Connecticut stoked firearm demand for Sturm Ruger, Smith & Wesson and other manufacturers while spurring speculation that sales eventually would be damped.
The U.S. Senate then rejected gun-buyer background checks in April, and a Pew Research Center poll the following month found that most Americans saw new laws as unlikely.
“We have not seen any slowing in demand for Ruger, but we’ve heard anecdotally that the normal seasonal slowdown has started,” Fifer said. “We expect some of it will be a reset from the huge surge that started in Q4.”
Sturm Ruger said second-quarter net income jumped 79 percent to $32.3 million, or $1.63 a share, from $18 million, or 91 cents, a year earlier.
The company also declared a dividend of 65 cents a share in the second quarter, which represents about 40 percent of net income. The payout is the highest quarterly dividend since 1988, according to data compiled by Bloomberg. It’s payable Aug. 30 to shareholders of record as of Aug. 16, the company said in a statement.
Sturm Ruger’s dividend yield was 5.1 percent yesterday, according to data compiled by Bloomberg.
“You have people that are looking for yield everywhere,” Bateman said. “There are people that won’t like the fact that they make firearms, but in this case, they’d have extraordinary yields, and that’s going to attract a lot of people.”
Sturm Ruger returned $17.3 million to shareholders through dividend payments during the first half, it said yesterday.
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