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3 Gun Stocks Up on Trump's Deregulatory Gun Export Proposal

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With its latest proposal to shift control of U.S. firearm exports from the State Department to the Commerce Department, the Trump administration once again proved its allegiance to the gun lobby. As expected shares of major U.S. gun manufacturing stocks witnessed a rally on May 24, following the proposed policy announcement.

What’s the New Policy?

As published in the Federal Register, firearms, close assault weapons and combat shotguns; guns and armament, and ammunition/ordnance would now on be controlled by the Commerce Control List (CCL) and the Export Administration Regulations (EAR).  The U.S. administration has justified the proposed rule, remarking the reforms will reduce “procedural burdens and costs” on American gunmakers that are selling firearms abroad.

Moreover, the new regulations would end the vital procedure of notifying Congress of firearms deals worth more than $1 million. The proposed policy is said to be cost effective for the U.S. government and is aimed at simplifying the licensing process for export of the aforementioned weaponries.

Will the Gun Industry Benefit?

The U.S. gun industry has been going through a rough patch since Donald Trump became President in 2016. With the Commerce Department’s primary agenda to push exports, the latest policy proposal, if implemented, will boost export of U.S. firearms to foreign lands.

To this end, the National Shooting Sports Federation (NSSF) — the trade association for the firearms industry — estimates that U.S. firearms exports could increase up to 20% under the new rules. However, a few other experts predict a comparatively smaller boost to the nation’s gun industry.

For instance, Jurgen Brauer, the chief economist of the Small Arms Analytics research group, said that the deregulatory export rules on implementation is likely to boost sales by 2% for American gun makers overseas.

The United States is already a significant exporter of firearms and related equipment, with over $662 million in deals notified to Congress in 2017 alone, according to an analysis by the Security Assistance Monitor. Whatever gains the deregulation provides, big or moderate, will ultimately be a boon for the U.S. gun industry.  

Gun Stocks in the Spotlight

Following the announcement of the aforementioned policy proposal, U.S. gun stocks witnessed notable gains in contrast to the slump most of them have been suffering lately. Below we have mentioned three such gun stocks.

Sturm, Ruger & Company, Inc. (RGR - Free Report) : This company is engaged in the design, manufacture and sale of firearms and precision metal investment castings. Its firearms include single-shot, auto-loading, bolt-action, lever action and muzzleloading rifles in a range of hunting calibers, shotguns in three gauges, .22 caliber rimfire autoloading pistols and centerfire autoloading pistols in various calibers; single and double-action as well as muzzleloading revolvers.

Foreign sales contribute less than 5% of Strum, Ruger’s consolidated net sales. Thus, the company has ample growth opportunity to expand its exports in the event of implementation of the deregulatory policy.

In response to the announcement, the company’s shares gained 1.8% in the last trading session.

American Outdoor Brands Corp. (AOBC - Free Report) : The company is a manufacturer and seller of firearms and accessory products for the shooting, hunting and outdoor enthusiast. The company's products comprise pistols, revolvers, rifles, guns, handcuffs and firearm-related products and accessories.

Foreign sales contributed approximately 3% of American Outdoor’s consolidated net sales. Thus, the company’s exports will get a boost if the deregulatory policy comes into effect.

The company’s shares gained 4.6% in the last trading session.

Vista Outdoor Inc. (VSTO - Free Report) : The company develops, manufactures and distributes optics, accessories and eyewear. Its product includes laser rangefinders, riflescopes, trail cameras, archery accessories, gun care products, mounts, powder, reloading equipment, targets as well as target systems.

Foreign sales contribute approximately 20% of Vista Outdoor’s consolidated net sales. Thus, the company has ample growth opportunity to expand its exports in the event of the implementation of the deregulatory policy.

The company’s shares gained 1.7%, in the last trading session.

Will the Policy See the Light of Day?

No doubt, if implemented, the lenient firearm export policy will provide a solid impetus to U.S. gun stocks. Human right groups and Democrats have strongly opposed the proposition since a deregulation in firearms export means less scrutiny of sales, which will increase the probability of U.S. guns falling into the wrong hand. In particular, they have expressed concerns that the new rule may worsen gun violence problems in foreign countries, particularly in Mexico and other Latin American nations.

According to the Violence Policy Center, from 2009 to 2014, more than 73,000 U.S.-made guns were seized in Mexico and 70% of guns used in Mexican homicides in 2017 were manufactured in the United States.  Therefore, the lenient firearm export policy will provide a solid impetus to U.S. gun industry. However, there remains an even bigger risk of the policy heightening global security issues. For now, the policy’s fate and that of the U.S. gun industry seems to hang in balance.

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