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What's in the Cards for Sturm, Ruger (RGR) in Q3 Earnings?

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Sturm, Ruger & Company, Inc. (RGR - Free Report) is scheduled to release third-quarter 2017 financial results on Oct 31.

In the last quarter, the company witnessed a negative earnings surprise of 48.65%. However, Sturm, Ruger outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average earnings surprise of 1.07%.

Let’s see how things are shaping up for the company prior to this announcement.

Factors at Play

Of late, consumers have started spending their discretionary income on concealed carry products and modern sporting rifles. This change in customer choice might hurt Strum, Ruger’s flagship firearms product line. Meanwhile, the company is gradually shifting its focus to commercial sporting products but whether it will succeed at the end or not remains a major concern. Once the third-quarter results are released, we may witness the company’s  progress in this new business line.

According to the FBI's National Instant Criminal Background Check System ("NICS"), third-quarter 2017’s firearm background checks dropped 6.8% from the year-ago quarter, which indicates a decline in demand. This, in turn, might hurt sales growth for publicly traded gun manufacturers like Sturm Ruger in the soon-to-be reported quarter.

Moreover, the Zacks Consensus Estimate for Strum, Ruger’s third-quarter earnings reflects a 56.3% year-over-year decline. The same for revenues are pegged at $121.2 million, implying a 24.9% decline.

Earnings Whispers

Our proven model does not conclusively show that Sturm, Ruger is likely to beat earnings this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. Unfortunately, this is not the case here, as you will see below.

Zacks ESP: Sturm, Ruger has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 45 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Sturm, Ruger carries a Zacks Rank #3, which increases the predictive power of ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Upcoming Peer Release

AMC Networks Inc. (AMCX - Free Report) is expected to report its quarterly results on Nov 2. The company carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Black Diamond, Inc. (CLAR - Free Report) is expected to report its quarterly results on Nov 6. The company has a Zacks Rank #3.

Malibu Boats, Inc. (MBUU - Free Report) is expected to report its quarterly results on Nov 7. The company sports a Zacks Rank #1.

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