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Why Sturm, Ruger & Company Stock Jumped 11% in April

By Demitri Kalogeropoulos – May 12, 2015 at 9:54AM

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Was it a meaningful move, or just noise?

What: Firearm manufacturer Sturm Ruger & Co.'s (RGR 3.70%) stock rose 11% during the month of April, according to S&P Capital IQ data.

RGR Chart

RGR data by YCharts

So what: The jump wasn't driven by any official news out of the company. Instead, investors apparently turned more optimistic that the firearm business would post a quick rebound after suffering through a weak 2014. 

Last year Sturm, Ruger & Co.'s sales fell 21%, which powered a 42% plunge in earnings. The sales slump was driven primarily by shrinking demand: The number of background checks for new purchases fell 12% from 2013, according to the National Instant Criminal Background Check System. Meanwhile, an oversupply of firearm inventory at distributors' warehouses, combined with aggressive price cuts by competitors, pushed margins lower for the entire industry.

Now what: But the business does appear to be on the upswing. The company in early May posted first-quarter earnings results that continued to show year-over-year dips in earnings and sales. However, the results were an improvement over the fourth quarter of 2014.

Sales rose on that basis thanks to strong demand for Sturm, Ruger & Co.'s new AR-556 rifle and LC9s pistol. At the same time, price-cutting by competitors has calmed down while inventory levels have fallen. These factors all point to improving prospects for the business in 2015. Still, Wall Street expects Sturm, Ruger & Co. to post a 5% sales dip this year as profits shrink to $2.94 per share from 2014's $3.22-per-share result.

Demitrios Kalogeropoulos owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sturm, Ruger & Company Stock Quote
Sturm, Ruger & Company
RGR
$60.60 (3.70%) $2.16

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