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Why Sturm, Ruger & Company Stock Gained 17.2% Last Month

By Keith Noonan – Jun 7, 2020 at 10:46AM

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The firearms stock is crushing the market in 2020 with a 48% gain year to date.

What happened

Shares of Sturm, Ruger & Company (RGR 0.18%) gained 17.2% in May, according to data from S&P Global Market Intelligence. The stock popped after the company reported first-quarter earnings early in the month, and it closed out the month at a 52-week high thanks in part to momentum for the broader market.

^SPX Chart

Data by YCharts.

Sturm, Ruger reported first-quarter results on May 6, delivering both sales and earnings that topped the market's expectations. Revenue climbed 8.4% year over year to $123.6 million, and earnings per share rose 17.6% to $0.87. The average analyst target had called for per-share earnings of $0.72 on sales of $116.1 million.

Ruger LCP center fire pistol Model 13705.

Image source: Sturm, Ruger & Company.

So what

Ruger has seen increased demand related to uncertainty created by the novel coronavirus pandemic, and the tailwinds were evident in the fiscal first-quarter results released on May 6. Unit sell-through from distributors to dealers increased 37% year over year.

The company also declared a dividend of $0.35 per share for the quarter, up from the per-share dividend of $0.29 it paid in the prior-year period and in line with the company's goal to keep its payout at roughly 40% of net income. Ruger had a net cash and short-term investment position totaling $187.6 million as of March 28, and management noted that strong performance in April had subsequently pushed the company's cash and short-term investment position above $200 million.

Now what

Ruger stock has gained even more ground in June, up 11.5% after just the first week of trading.

^SPX Chart

Data by YCharts.

The company doesn't usually provide forward-looking guidance, but CEO Chris Killoy indicated that it was looking at ways to increase production while still keeping long-term demand fluctuations in mind. 

Sturm, Ruger stock trades at 17 times forward earnings estimates and has a dividend yield of 1.1%.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Sturm, Ruger & Company, Inc. Stock Quote
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