Daily Management Review

Strong Smith & Wesson Earnings Results in U.S. Gun Shares Extend Gains


06/17/2016




Strong Smith & Wesson Earnings Results in U.S. Gun Shares Extend Gains
Following the shootout at a gay nightclub in Florida in which 49 people were killed and amidst fears and apprehensions that the US government would soon enact stringent gun control regulations, shares of firearm makers surged after a strong quarterly report from Smith & Wesson Holding Corp which added to gains that were made by the company last week.
 
Shares of Smith & Wesson and rival Sturm Ruger & Co had spiked as much as 11 percent on Monday in a stock market reaction that has become familiar after mass shootings.
 
Some people are led to buy guns following amplification of fears of crime are amplified spurred by high profile shootings such as the one in Orlando, Florida. Others apprehend U.S. gun control laws becoming stricter and hence engage in gun buying. Both feelings spur more sales for gun makers and strengthen their investment appeal.

For example, Smith & Wesson reported fourth-quarter results above Wall Street's expectations on Thursday. The investors were also impressed by the revenue forecast for fiscal 2017 given by the company.
 
The shares of Smith & Wesson's shares rose 7 percent and Sturm Ruger's rose 4 percent.
 
Partly because of mass shootings including one in December in San Bernardino, California, that increased calls for gun control, shares of Smith & Wesson have surged over 40 percent in the past year.
 
With Democrats challenging Republicans to defy the national gun lobby and vote for new restrictions, the U.S. Senate inched closer to scheduling votes on limited gun control measures on Thursday.
If a Democrat wins the presidential election on Nov. 8 and becomes positioned to appoint future Supreme Court justices, it expects a rise in demand for its firearms, Sturm Ruger had said in February.
 
Any potential surge in demand caused by consumers worried about increased gun control were not displayed by Smith & Wesson's revenue forecast, Chief Financial Officer Jeff Buchanan said on a conference call.
 
"We plan our business outlook and set our growth parameters based on our strategic direction, exclusive of any political or election-cycle influences that reside outside of our control," Buchanan said.
 
Investors worry that a year-long surge in firearm sales is losing steam even as legislators and presidential hopefuls discuss gun control measures.
 
According to adjusted data from the National Shooting Sports Foundation, there was a rise of 1.1 percent in FBI background checks which give an indication of the state of U.S. gun sales. It is becoming difficult for gun sellers to top last year's strong sales growth, the data suggests.
 
Compared to 31 percent growth in the previous year, Smith & Wesson estimated its revenue would increase around 4 percent in fiscal 2017.
 
(Source:www.reuters.com) 






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