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Sturm Ruger Earnings: An Early Look

By Dan Caplinger - Apr 25, 2013 at 4:20PM

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The company announces earnings next Monday.

Next Monday, Sturm Ruger (RGR -0.91%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, knee-jerk reaction to news that turns out to be exactly the wrong move.

Recent tragic events have raised calls for tighter gun regulation, and those calls have led many shareholders in gun stocks to wonder about the future prospects for Sturm Ruger and its peers. 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

$1.01

Change From Year-Ago EPS

28%

Revenue Estimate

$131.65 million

Change From Year-Ago Revenue

17%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

How will Sturm Ruger's react to recent events?
Analysts have boosted their earnings estimates on Sturm Ruger substantially in the past few months, raising their consensus for the just-ended quarter by $0.07 per share and their full-year 2013 calls by $0.22 per share. But the stock hasn't performed very well, falling 6% since mid-January.

Sturm Ruger has been near the center of investor debate about the impact of calls for tighter gun laws. On one hand, gun control could limit Sturm Ruger's future sales, putting an end to the solid growth it has posted for years. Yet investors have arguably benefited from the fear of new gun-control legislation. Sporting-goods retailer Cabela's, which named Ruger its vendor of the year last month, posted double-digit same-store sales due largely to surging firearms and ammunition sales, while ammo-maker Olin has seen a huge ramp-up in demand that has strained its ability to deliver sufficient supply to meet it.

Still, cycles like these have risen and fallen at various points over the years. With a proposed law having been voted down that would have made background checks more stringent, gun buyers may decide that big gun-control changes aren't imminent. If that happens, then the recent surge will likely give way to a slow period, at least temporarily.

One interesting question facing Sturm Ruger is whether to relocate its corporate headquarters outside of Connecticut, which recently enacted stricter gun laws at the state level. Smaller Connecticut-based gunmaker PTR Industries said it will leave the state, while others are also mulling the move. Given their size, it seems unlikely that Sturm Ruger or rival Smith & Wesson would leave their New England homes, but other states, such as Texas and Mississippi, are trying to get gun businesses to relocate.

In Sturm Ruger's quarterly report, watch for any comments from management about its future guidance. Understanding when a possible future slowdown may come will be useful in predicting when the best time to buy the stock will be.

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Stocks Mentioned

Sturm, Ruger & Company, Inc. Stock Quote
Sturm, Ruger & Company, Inc.
RGR
$62.98 (-0.91%) $0.58

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