Last week's earnings report from Sturm, Ruger (NYSE:RGR) could be the epitome of the saying, "be careful what you wish for, because you just might get it."

While the gun manufacturer never advocated voting for or against any particular candidate last year, Ruger pledged to donate $2 from every gun sale it made before Election Day to the National Rifle Association's Institute for Legislative Action, as well as making a matching contribution to the gun-rights group up to a total of $5 million. Not surprisingly, the NRA had endorsed Donald Trump's candidacy.

Handgun padlocked with chains

Image source: Getty Images.

Targeting long-term growth

While there was good reason to expect a Trump presidency would protect gun owner rights while a Hillary Clinton administration would have eroded them, his election also took away one of the drivers that pushed sales to record highs in 2016. Without the imminent threat of stricter gun-control laws, the need to go out and buy a gun right away dissipated.

Although fear of tighter gun laws is only one factor that motivates buyers, it was last year's election that Ruger identified as being the primary cause of this quarter's poor showing. Along with reduced dealer inventory ahead of a seasonal slowdown and heavy industry discounting, the gunmaker said demand this year was substantially weaker because of "stronger-than-normal demand during most of 2016, likely bolstered by the political campaigns for the November 2016 elections" --  campaigns, it should be pointed out, that Ruger itself made a point of promoting.

In last year's second-quarter earnings conference call with analysts, then-CEO Michael Fifer kicked off his prepared remarks with a statement in support of the NRA's legislative initiative and Ruger's own "Take Action" campaign, where he urged "customers and all freedom-loving Americans to take action in support of the Second Amendment, especially in the month leading up to the November election," by buying a Ruger gun and contacting their legislative representatives.

Make no mistake: Ruger wasn't wrong to support an electoral campaign that promised to improve the long-term health of the firearms industry. It might sell more guns in an administration in which the threat of gun control is prominent, but if those fears turned to reality, Ruger and other gunmakers would be hurt. The industry is better off with an administration that supports gun ownership; Ruger is simply a case of reaping what it sowed.

Person looking at a handgun at a gun show

Image source: Getty Images.

An industrywide malaise

Firearms sales in the second quarter of 2017 fell 21.5%, while operating income plunged 73% year over year. It comes as a number of industry names also reported depressed figures. Rival American Outdoor Brands (NASDAQ:SWBI) reported in late June that its fiscal fourth-quarter gun sales fell more than 7%; sporting-goods retailer Cabela's (NYSE:CAB) said U.S. comparable-store sales tumbled almost 10% in the quarter, led by firearms and shooting-related products, which accounted for almost half the decline; and Olin (NYSE:OLN), which makes Winchester brand ammunition, said ammo sales fell 6%, while profits dropped 39%.

There were other problems Ruger had that didn't help its position, such as the total recall of its new Mark IV pistol for accidental discharge problems, but most of the mess was a result of the election. Dealers had stocked up on guns believing Clinton would win, only to be stuck with excess inventory after her surprise defeat. The result is that Ruger and others have been unable to ship more guns, as dealers are gutting prices to move product they already have in stock.

Chart showing year-to-date criminal background checks of gun buyers 1999-2017

Data source: FBI. Chart by author.

Still hitting historical highs

Yet it's not all gloom and doom. While the FBI's National Instant Criminal Background Check system (NICS) showed a big 20% drop in year-over-year background checks of potential gun buyers in July, the year-to-date numbers are still running ahead of the historical trend. Demand may be down from last year, the biggest year ever for gun sales, but they're still elevated well above what is typical.

Sturm, Ruger's stock has lost 24% of its value this year, but at 13 times earnings and less than 12 times next year's estimates, it may be at a value that's too good to pass up. It is walking with a limp at the moment from having shot itself in the foot with its electoral campaign promotion, but it will be that much stronger after the current bit of pain wears off.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.