Sturm Ruger RGR) is principally engaged in the design, manufacture, and sale of firearms and precision metal investment castings.It operates in two segments, Firearms and Castings. The Connecticut based company has 1,920 employees and is now a Zacks Rank #5 (Strong Sell) and today’s Bear of the Day.
Sturm Ruger has a market cap of $1.1 Billion and has a Forward PE of 16. The stock sports a Zacks Style Scores of “D” in Value and “C” in Momentum. The company has 3-5 year growth rate of 5% and dividend yield of 3.22%.
RGR reported on May 5th with a beat of 25 cents, seeing $1.21 verse the $0.96 expected. However, revenues came in below expected; at $151.6 Million verse the $158 Million. The company also guided Q2 revenues lower to $178-183 Million verse the $191 Million expected. They also expected same store sales to come in at -1% verse the +1% that was expected.
The stock spiked higher from $64 to $70, but has since fallen down below the $58 level. Recently the stock shot 10% higher after the Orlando shooting, but has since fallen back below $60 again. It’s clear that investors are taking every opportunity they have to sell stock and that could be due to falling sales and estimates.
Over the last month, the company has seen estimates revisions lowered for both fiscal year 2016 and 2017 as well as next quarter. While the current quarter looks ok, the numbers over the next couple years are not looking good for a growth company. For the current year we have seen a 10% revision lower from $4.21 to $3.78. For 2017, estimates have fallen 27%, from $3.85 to $2.78.
Sturm Ruger doesn’t report till July 26th, but we will see Smith and Wesson (SWHC - Snapshot Report) numbers on Thursday. If the gun sales picture hasn’t shown a turnaround it could be trouble for both these companies.
A Better option
If investors want exposure to the leisure and recreation sector they are better going with Callaway Golf (ELY - Snapshot Report) . The company designs, develops, manufactures and markets high quality, innovative golf clubs and is aZacks Rank #2 ( Buy).
In late May Callaway affirmed fiscal year 2016. The company also said they see positive momentum and a stabilizing golf industry and sees a road to profitability in the golf ball segment. Estimates for Callaway are being revised higher in all time frames. Moreover, the stock sports a Zacks Style Score of “B” in Momentum and has a dividend of 0.40%.
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