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Why Sturm, Ruger Stock Climbed 5.97% in March

By Keith Noonan - Apr 8, 2020 at 8:59AM

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The firearms company's shares are up roughly 7.5% year to date.

What happened

Shares of Sturm, Ruger & Company (RGR 1.04%) climbed 5.97% in March, according to data from S&P Global Market Intelligence. While the broader market struggled under pressures created by the coronavirus pandemic, the unprecedented circumstances proved to be a tailwind for the firearms company.

^SPX Chart

^SPX data by YCharts.

Concerns about COVID-19 and the prospect of prolonged periods of self-isolation and quarantines prompted people in the U.S. to stock up on essential supplies in March. The cloud of uncertainty created by the viral outbreak also elevated sales for security and self-defense items, and weapons manufacturers including Ruger saw increased product demand. 

A Ruger American Pistol Duty Centerfire pistol.

A Ruger pistol. Image source: Strum, Ruger & Company.

So what

After a challenging year in 2019, Ruger and other firearm companies are experiencing heightened demand as people stock up in response to the dramatic shifts brought about by the pandemic. The FBI carried out roughly 3.7 million new background checks in March, the highest number since the system was implemented in 1998. The record number of background checks indicates that gun sales in the U.S. hit record levels last month, so it's not surprising that Ruger stock posted gains and significantly outperformed the broader market. 

Now what

Ruger stock is roughly flat in April's trading amid a bit of a rebound for the broader market.

RGR Chart

RGR data by YCharts.

With many states ordering firearms stores closed as part of broader shutdown orders for businesses deemed nonessential, it would be surprising to see gun sales in April top March's record numbers. But firearms companies could see a long-term tailwind as the circumstances stemming from the pandemic are sure to remain in the public consciousness for years to come. 

Sturm, Ruger & Company trades at roughly 21 times this year's expected earnings and has a dividend yield of about 1.4%.

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