What's In The Cards For Sturm, Ruger (RGR) In Q4 Earnings?
Zacks Investment Research | Feb 18, 2018 08:44PM ET
Sturm, Ruger & Company (NYSE:RGR) is scheduled to release fourth-quarter 2017 financial results on Feb 21.
Last quarter, the company witnessed a negative earnings surprise of 11.16%. Moreover, Sturm, Ruger underperformed the Zacks Consensus Estimate in two of the trailing four quarters, the average earnings miss being 3.72%.
Let’s see how things are shaping up for the company prior to this announcement.
Factors at Play
During the third quarter of 2017, Strum, Ruger witnessed a 25% year-over-year decline in its estimated unit sell-through of its products from the independent distributors to retailers, owing to decreased overall consumer demand across 2017. Moreover, reduced purchasing by retailers to lower inventories and generate cash as well as aggressive price discounting and lucrative consumer rebates offered by many competitors led to this lower unit sell-through. With no near-term improvement expected in these factors, we expect the company’s fourth-quarter results to reflect reducedunit sell-through.
According to the FBI's National Instant Criminal Background Check System (NICS), firearm background checks dropped 9.5% year over year in fourth-quarter 2017, which indicates a drop in demand. This, in turn, might hurt sales of publicly traded gun manufacturers like Sturm Ruger.
On the bright side, realizing that consumers’ preference is shifting toward concealed carry products and modern sporting rifles, Strum, Ruger shifted focus toward the development of commercial sporting products. In 2017, the company unveiled a range of products like the Mark IV pistols, Precision Rifle and the LCP II pistol. These products represented 30% of firearm sales for the company in the first nine months of 2017. Once the fourth-quarter results are released, we expect to witness more progress in the new business line.
Meanwhile, the Zacks Consensus Estimate for Strum, Ruger’s fourth-quarter earnings reflects a 44.1% year-over-year decline. The same for revenues is pegged at $113.5 million, implying a 29.9% 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 Zacks Investment Research
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