Will Sturm, Ruger Earnings Growth Ever Slow Down?

Sturm, Ruger (NYSE: RGR  ) will release its quarterly report tomorrow, and as usual, investors have high hopes for the stock. With expectations of further huge revenue gains, Sturm, Ruger earnings should see the massive growth that shareholders have come to expect from the gunmaker.

It's hard to believe that less than a year ago, Sturm, Ruger seemed to be on the brink of a hugely negative transformation in the industry. Yet just months after tragic shootings, the threat of adverse legislation has largely faded, and the company has returned to its winning ways by taking advantage of strong demand for its products. How long can the good times last for the gunmaker? Let's take an early look at what's been happening with Sturm, Ruger over the past quarter and what we're likely to see in its quarterly report.

Stats on Sturm, Ruger

Analyst EPS Estimate

$1.18

Change From Year-Ago EPS

30%

Revenue Estimate

$154.7 million

Change From Year-Ago Revenue

29%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Where will Sturm, Ruger earnings fall this quarter?
Analysts have kept raising their views on Sturm, Ruger earnings in recent months, with a $0.15 jump in their June-quarter estimates and more than double that move for full-year 2013 and 2014 estimates. But the stock has seemed to top out, rising less than 2% since late April.

Sturm, Ruger certainly started the quarter out well, posting first-quarter results that reflected a surge in demand as buyers tried to stockpile firearms before feared new regulations could take effect. Sales jumped 39%, pushing net income up by 53% and leading the company to boost its variable-dividend accordingly to reflect the profit growth.

At least for now, there's been enough demand that Sturm, Ruger hasn't really had to worry about competition. Conditions in the ammunition space are similarly busy, with major producers Alliant Techsystems (NYSE: ATK  ) and the Winchester division of Olin (NYSE: OLN  ) running 24/7 shifts to try to keep up with demand. Sturm, Ruger rival Smith & Wesson (NASDAQ: SWHC  ) reported equally strong results in June, with a 38% rise in revenue leading to a 63% jump in net income. Of course, that could change if conditions in the gun industry start to slow, and having two strong companies could lead to a tough fight if both feel more pressure to wrangle over customers.

Sturm, Ruger is making a big bet that gun demand will continue to be strong, having purchased a third manufacturing plant to expand output in its first major expansion in a quarter-century. Such a move could backfire if falling demand or tighter gun control restricts future sales, but it could also help the company earn more as long as conditions remain strong.

In the Sturm, Ruger earnings report, watch for the company to discuss its plans for its new manufacturing plant as well as its long-term view on the industry. With so much potential, Sturm, Ruger seems likely to keep seeing solid growth for several quarters to come.

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