Sturm, Ruger & Co.: Buy This Gun Stock

Sturm, Ruger & Co. (RGR) announced first quarter ended March 31, 2016 net sales of $173.1 million, up 26 percent year-over-year from $137.0 million of net sales during the same period last year.

Sturm declared first quarter of 2016 net income of $23.3 million or $1.21 per diluted share, up 50 percent year-over-year from $15.5 million or $0.81 per diluted share in first quarter of 2015.

Impressive growth

The firearms major reported continued year-over-year expansion in both its top and bottom lines primarily driven by a significant growth in general industry demand being further accelerated by strategic launch of new products coupled with enhanced accessibility of key products under significant demand and superior production capacity.

During the first quarter of 2016, Sturm illustrated a significant increase in new product sales that includes the LC9s pistol, the AR-556 modern sporting rifle, the Precision Rifle, and the American Pistol, characterized $50.3 million or about 29% of consolidated firearm sales.
The innovative product sales comprises just of fresh products that were launched during the previous two years.

The projected unit sales of Sturm’s key products ranging from the autonomous distributors to prime retailers grew 17% during the first quarter of 2016 as against the same period last year. Further, the background checks by National Instant Criminal Background Check System or as modified by the National Shooting Sports Foundation grew 18%.

The significant growth in firearm sales from the authorized stores of Sturm depicts the rising consumer’s confidence in the product reliability and superiority provided by the company and it’s believed to continue to deliver sustainable long-term growth while offering attractive shareholder returns, going forward.

The global demand for small lethal weapons is estimated to grow significantly with time as small arms are believed to striking means of spreading violence for many reasons including, wide availability, less costly, hugely deadly, easy in usage, extremely portable, durable, possess genuine civilian, police and military uses, and simply concealed.

What will drive gun growth?

Very similar to other economic supplies, firearms supply is dependent on the key forces of supply and demand and therefore, are aggressively sold on illegitimate and lawful markets.

The increasing worldwide terror activities and global security forces key actions to mitigate these insurgency operations is expected to drive notable demand for assault rifles such as AK-47s along with several other handy weapons which should definitely benefit the key weapons manufacturer.

Further, Donald Trump’s agenda has always been to enhance the military might of the US and thus, supports the upgradation of aerospace and defense technology. In addition, Trump has also promised to remove the ban on the US gun culture while pledged to safeguard the people’s Second Amendment rights, according to which “the right of the people to keep and bear arms shall not be infringed upon.”

During the first quarter of 2016, Sturm’s finished goods inventory declined by 14,600 units and key company distributor inventories for its products fell by 54,300 units, primarily driven by the expanding global demand for firearms and mostly related to the election time in the US.

The new government of US is estimated to notably support the country’s gun culture while safeguarding the common people Second Amendment Right which should definitely expand the demand for firearms in the country, benefiting Sturm and several other key weapon providers.

Sturm is believed to regain sales momentum for its uniquely and innovatively designed firearms amid strengthening political environment in the US for a new government led by Donald Trump, who is hugely in favor of the country’s gun culture.


Overall, the investors are advised to “Buy” equity in Sturm, Ruger & Co. Inc. considering the company’s significant near-term and longer term growth prospects being supported by its robust balance sheet with no debt and significant total cash position of $80.46 million, encouraging the company to make future growth investments. Further, the profit margin of 11.90% also seems satisfactory.
Published on Jul 7, 2016
By Subhen Mittra

Copyrighted 2020. Content published with author's permission.

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