Gun stocks have been soaring this year on rising gun sales. Many consumers have been hoarding ammunition in fear of stricter gun laws that might be implemented under the Biden administration. In fact, in April the FBI conducted 3.5 million background checks compared to 2.9 million in the same period last year.
Furthermore, as the COVID-19 mass vaccination drive takes effect, the resumption of outdoor activities, including hunting, have been driving heightened demand for guns.
Given this backdrop, we believe Sturm, Ruger & Company, Inc. (RGR), Smith & Wesson Brands, Inc. (SWBI), and Big 5 Sporting Goods Corporation (BGFV) should see substantial growth in the near term. The shares of these companies have been heading north lately and they may continue doing so in the coming months.
Sturm, Ruger & Company, Inc. (RGR)
Founded in 1949, RGR is one of the nation’s leading manufacturers of rugged, reliable goods for the commercial sporting market. It operates in two segments, Firearms and Castings. The company sells its firearm products through independent wholesale distributors, and its castings and MIM parts through manufacturers’ representatives.
This month, RGR’s Team Ruger captain Doug Koenig placed first in the Open Division and first overall at the Pennsylvania Regional NRA Action Pistol match, held at the Chambersburg Pistol & Rifle Club, by shooting his Ruger Custom Shop SR1911 Competition pistol. The Koening gave credit to RGR firearms’ quality and reliability for winning the prestigious match, which should boost the company’s brand value.
RGR’s net sales increased 49.1% year-over-year to $184.38 million in its first quarter, ended April 3. Its gross profit grew 101.5% from its year-ago value to $72.57 million, while its net income increased 149% year-over-year to $38.19 million over this period. RGR’s EPS rose 148.3% year-over-year to $2.16.
A $1.72 consensus EPS estimate for current quarter ending, June 30, represents a 63.8% improvement year-over-year. The $175.88 million consensus revenue estimate for the current quarter represents a 35% increase from the same period last year. The stock has gained 25.8% over the past year.
RGR’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RGR is also rated an A in Quality, and a B in Value. Within the Air/Defense Services industry, it is ranked #5 of 68 stocks.
To see additional POWR Ratings for Momentum, Growth, Sentiment and Stability for RGR, Click here.
Smith & Wesson Brands, Inc. (SWBI)
Formerly known as American Outdoor Brands Corporation, SWBI is a U.S.-based leader in firearm manufacturing and design that delivers a broad portfolio of quality handgun, long gun, and suppressor products to the global consumer and professional markets under the iconic Smith & Wesson, M&P, and Gemtech brand names. The company also offers manufacturing services, including forging, machining, and precision plastic injection molding services.
This month, SWBI revealed its plans to divest its Thompson/Center Arms brand. This move should allow SWBI to immediately redirect manufacturing capacity to increase overall production volumes, thereby allowing it to gain additional market share while increasing its profitability.
In the fiscal third quarter, ended January 31, SWBI’s non-GAAP gross profit increased 207.4% year-over-year to $109.70 million. Its non-GAAP operating income increased 487.2% from its year-ago value to $80.56 million, while its income from continuing operations grew 699% year-over-year to $62.40 million. The company reported $62.39 million in net income, representing a 988.8% increase year-over-year. Its EPS came in at $1.12 for this period, compared to $0.14 in the prior-year quarter.
Analysts expect SWBI’s revenue for the current quarter, ended April 30, to be $259.8 million, representing 11.2% year-over-year growth. The company’s EPS is likely to increase 386.6% year-over-year to $3.99 for the current year. SWBI has gained 96.9% over the past year.
It is no surprise that SWBI has an overall B grade, which equates to Buy in our proprietary ratings system. It has an A grade for Value and Quality. In the A-rated Athletics & Recreation industry, it is ranked #17 of 34 stocks.
In total, we rate SWBI on eight different levels. Beyond what we’ve stated above, we have also given SWBI grades for Momentum, Sentiment, Growth and Stability. Get all the SWBI ratings here.
Big 5 Sporting Goods Corporation (BGFV)
BGFV is a sporting goods retailer in the Western United States that operated 430 stores in 11 states as of January 3. It provides a full-line product offering that includes athletic shoes, apparel and accessories, as well as a broad selection of athletic equipment for hunting, fishing and other recreational activities. The company sells private label merchandise under its own trademarks that include Golden Bear, Harsh, Pacifica, and Rugged Exposure.
In February, BGFV entered a new loan agreement with Bank of America. The five-year term loan agreement provides for a secured revolving credit facility with aggregate committed availability of up to $150 million. This facility should support the business through the current, dynamic retail environment and over the long-term.
During the first quarter, ended April 4, BGFV’s net sales increased 25.3% year-over-year to $272.81 million. Its gross profit rose 51.6% from its year-ago value to $97.89 million. The company’s net income increased 567.5% year-over-year to $21.55 million, while its EPS grew 536.4% from the prior-year quarter to $0.96.
BGFV is expected to generate 28% revenue growth year-over-year to $291.65 million for the current quarter, ending June 30. Its EPS is estimated to increase 3500% from the year-ago value to $1.08 in the current quarter. Over the past year, BGFV’ stock has gained 2,116.7%.
The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. BGFV has an A grade for Value, Momentum and Quality. Within the Athletics & Recreation industry, it is ranked #1.
Click here to see the additional POWR Ratings for BGFV (Growth, Sentiment and Stability).
RGR shares were trading at $74.14 per share on Thursday afternoon, up $1.58 (+2.18%). Year-to-date, RGR has gained 15.09%, versus a 10.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More…
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