According to The Washington Post’s analysis of federal gun background-check data, firearm sales rose by 80% to more than two million in January 2021 after a mob-led assault on the U.S. Capitol. Also, an increase in hunting as outdoor activities resume with progress in the nationwide COVID-19 vaccination drive is expected to drive gun sales in the coming months.
Fear of restrictions on gun ownership in the future is also boosting gun sales. Many U.S. residents expect the Biden administration to impose restrictions on gun sales in response to mass shootings in Colorado and Georgia over the last two weeks. Also, with U.S. military bombing Iran-backed militias in Syria in February, relations with the Middle East have worsened, and fear of a counterattack has induced the government to increase its inventories of weaponry.
Indeed, the global ammunition market is expected to grow at a CAGR of 3.6% over the next eight years. Therefore, we believe gun stocks Vista Outdoor Inc. (VSTO), Sturm, Ruger & Company, Inc. (RGR), and Smith & Wesson Brands, Inc. (SWBI) will generate higher sales and profits in the near term. These stocks have the potential to capitalize on long-term trends.
Vista Outdoor Inc. (VSTO)
VSTO is a designer, manufacturer and marketer of consumer products in the outdoor sports and recreation markets. The company operates through two segments—Shooting Sports and Outdoor Products. VSTO serves a broad range of end consumers, including hunters and recreational shooters, athletes, law enforcement and military professionals. Its products are sold worldwide through a wide variety of mass, specialty and independent retailers and distributors, and through relevant brand's websites and third-party e-tail websites.
VSTO’s brand, Primos Hunting, introduced versatile new bow, rifle and shotgun cases this month. The bow case also comes with backpack straps for hands-free carrying and D rings so hunters can hang the case off a UTV/ATV. The brand also introduced two new turkey calls (the Hen House Series and the Shot Caller), a new elk call, and the Slide Bugle this month.
For its fiscal 2021 third quarter (ended December 27, 2020), VSTO’s net sales increased 35.3% year-over-year to $574.68 million. Its non-GAAP gross profit has increased 84.3% year-over-year to $163.63 million. The company’s non-GAAP net income of $62.13 million for the third quarter represents a 401.2% rise year-over-year. Also, its non-GAAP EPS has increased 390.5% year-over-year to $1.03.
Analysts expect VSTO’s EPS to improve 472.7% year-over-year for the current quarter, ending March 31, 2021, to $0.63. It has surpassed the Street’s EPS estimates in each of the trailing four quarters. Also, its consensus revenue estimate of $525.80 million for the current quarter represents a 23.3% rise on a year-over-year basis. The stock has gained 392.9% over the past year and closed yesterday’s trading session at $33.39.
VSTO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Growth, Value, Momentum and Quality. We have also graded VSTO for Stability and Sentiment. Click here to access all VSTO’s ratings.
VSTO is ranked #8 of 33 stocks in the A-rated Athletics & Recreation industry.
Sturm, Ruger & Company, Inc. (RGR)
Based in Southport, Connecticut, RGR designs, manufactures, and sells firearms to domestic customers. The company’s segments include firearms and castings. The firearms segment manufactures and sells rifles, pistols, and revolvers mainly to a range of federally licensed, independent wholesale distributors primarily located in the United States. Its castings segment manufactures and sells steel investment castings and metal injection molding (MIM) parts. The company also manufactures and sells accessories and replacement parts for its firearms.
This month, RGR launched its MAX-9 pistol, which has all the features of a full-sized handgun but comes in a size that is comfortable to carry. The company also introduced its Jeff Quinn Memorial GP100 revolver in February to honor Jeff Quinn, the founder of Gunblast.com who passed away last year. Furthermore, RGR’s Board of Directors declared a quarterly dividend of $0.71 per share payable on March 26.
RGR’s total net sales were $169.26 million for the fourth quarter, ended December 31, 2021, which represents an improvement of nearly 61% year-over-year. While its gross profit came was $64.20 million for the fourth quarter, up more than 159% from the prior year period, its net income came in at $31.71 million, up 286.4% year-over-year. Moreover, RGR’s diluted EPS increased nearly 287% year-over-year to $1.78.
A consensus EPS estimate of $1.43 for the current quarter, ending March 31, 2021, represents a 64.4% rise year-over-year. RGR also surpassed consensus EPS estimates in three of the trailing four quarters. The company’s consensus revenue estimate of $153.50 million for the next quarter, ending June 30, 2021, represents a 17.8% rise from the prior year period. The stock has rallied 59.3% over the past year to close yesterday’s trading session at $69.81.
RGR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary ratings system.
The stock has an A grade for Quality and a B grade for Value. In addition to the POWR Ratings grades we’ve just highlighted, one can see RGR’s ratings for Momentum, Growth, Stability and Sentiment here.
RGR is ranked #5 of 67 stocks in the Air/Defense Services industry.
Smith & Wesson Brands, Inc. (SWBI)
Formerly known as American Outdoor Brands Corporation, SWBI designs, manufactures and sells firearms products. The company offers firearms that include revolvers and pistols, modern sporting rifles, bolt action rifles, and muzzleloaders. It also provides manufacturing services, including forging, machining, and precision plastic injection molding services. SWBI sells its products to gun enthusiasts, sportsmen, hunters, individuals desiring home and personal protection, and security agencies, among others.
This month , 2021 SWBI introduced its latest edition to its Shield line of pistols--the M&P Shield Plus. It is the most advanced M&P Shield pistol to date and features a magazine capacity of up to 13 rounds in a slim, micro-compact frame. The company’s Board of Directors announced on March 4, 2021 that it has authorized a new $100 million share repurchase program and declared a dividend of $0.05 per share payable on March 31.
The company’s net sales have increased 102.2% year-over-year to $257.63 million for its fiscal 2021 third quarter ended January 31, 2021. SWBI’s non-GAAP gross profit was $109.70 million, which represents a 207.4% improvement year-over-year. Its non-GAAP operating income came in at of $80.56 million, up 487.4% year-over-year. Furthermore, SWBI’s net income has increased 988.6% year-over-year to $62.39 million, and its non-GAAP EPS has increased 700% year-over-year to $1.12.
Analysts expect SWBI’s EPS for the current quarter, ending April 30, 2021, to be $1.01, representing an increase of 77.2% year-over-year. It’s earnings surprise history looks impressive; the company surpassed the consensus EPS estimate in each of the trailing four quarters. For its fiscal 2021, analysts expect SWBI’s revenue to be $993.60 million, representing a 46.5% rise from the prior year period.
The stock has gained 142.9% over the past year to close yesterday’s trading session at $18.14. It has also gained 15.5% over the past six months.
It’s no surprise that SWBI has an overall B rating, which equates to Buy in our POWR Ratings system.
Also, the stock has an A grade for Value and Quality and a B grade for Growth. Click here to see the additional POWR Ratings for SWBI (Stability, Momentum and Sentiment). SWBI is ranked #15 in the Athletics & Recreation industry.
The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
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VSTO shares rose $0.96 (+3.05%) in after-hours trading Tuesday. Year-to-date, VSTO has gained 32.49%, versus a 4.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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