Sturm, Ruger & Company

Sturm, Ruger & Company, Inc. (RGR - Snapshot Report), the revolver manufacturer, saw firearms sales jump 55.5% in the first quarter as demand remains strong. The company has surprised on estimates the last 2 quarters. RGR trades with a forward P/E of 12.59 despite the stock nearly doubling since Feb 20.

Company Description

Sturm, Ruger manufactures firearms for the commercial sporting market which includes hunting, target shooting, collecting, self-defense, law enforcement, and government agencies. The company was founded in 1949 and has manufacturing facilities in New Hampshire and Arizona.

First Quarter Firearms Sales Surge 55.5%

On Apr 28, the company reported first-quarter results which surprised on analysts' estimates by 25%, or 6 cents a share. Earnings per share were 30 cents compared to only 7 cents in the year ago period. The one covering analyst expected just 24 cents.

Sales climbed 49.4% to $63.5 million from $42.5 million in the first quarter of 2008. Ruger reported "unusually high" first quarter demand of 500,000 units. Firearm sales jumped 55.5% year over year and 8.7% from the fourth quarter of 2008. The company also launched a new product during the quarter, the LCR, which is the Lightweight, Compact Revolver.

As testament to popularity of the company's products, backlog also soared to 458,900 units, or $136.3 million, at the end of the quarter from 175,900 units, or $47.8 million, at the end of the fourth quarter 2008.

Cash is King

Sturm, Ruger is in a rare position to be debt-free. The company had cash, cash-equivalents and short-term investments of $33.9 million at the end of the quarter.

Consensus Estimates Rise

Given the earnings surprise and the continued strong demand for the company's products, the one covering analyst has sharply raised estimates for both the second quarter and the full year.

Second-quarter estimates rose 3 cents to 27 cents in the last 2 months.

2009 estimates jumped nearly 17% to $1.05 from 90 cents over the last 60 days.

Value Fundamentals

Sturm, Ruger is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 12.59 and a price-to-book of 2.99. The company has a solid 1-year return on equity (ROE) of 17.93%. As an added bonus, it also pays a dividend, with a current yield of 3.00%.