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RGR

Sturm Ruger NYSE:RGR Stock Report

Last Price

US$51.27

Market Cap

US$905.9m

7D

1.1%

1Y

-31.6%

Updated

03 Oct, 2022

Data

Company Financials +
RGR fundamental analysis
Snowflake Score
Valuation4/6
Future Growth0/6
Past Performance3/6
Financial Health6/6
Dividends5/6

RGR Stock Overview

Sturm, Ruger & Company, Inc., together with its subsidiaries, designs, manufactures, and sells firearms under the Ruger name and trademark in the United States.

Sturm, Ruger & Company, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Sturm Ruger
Historical stock prices
Current Share PriceUS$51.27
52 Week HighUS$81.72
52 Week LowUS$49.65
Beta0.46
1 Month Change-1.57%
3 Month Change-22.44%
1 Year Change-31.58%
3 Year Change17.78%
5 Year Change1.12%
Change since IPO572.39%

Recent News & Updates

Oct 03

Sturm, Ruger & Company Could Still Be A Winner In 2022

Summary RGR shares have plunged (24%) since the Q2 FY ‘22 earnings announcement on inflation and weaker demand concerns. But demand may be more robust than it appears, with 2H months typically acting as a tailwind with hunting season kicking in and more gun owners heading to the range. Also, high materials costs, which impacted both firearms and ammunition production, have been easing. RGR may be well-positioned to deliver surprises on both the top and bottom lines in Q3 and Q4 FY ‘22. Despite share performance year-to-date, investors who have hung on may want to hang on a little longer on the bet that 2H FY ‘22 performance might be stronger than the market is expecting. An Unwarranted Plunge It might be a little early to start speculating about how Sturm, Ruger & Company (RGR) might finish their year given that they won’t even be reporting Q3 FY ‘22 results until November. Yet, as I have taken a “wrong-way” ride on the firearms manufacturer this year, I can’t resist the exercise, especially with the stock plunging nearly (24%) since Q2 FY ‘22 earnings were announced in early August. Figure 1: RGR Stock Performance Since Q2 FY ‘22 Earnings Results (Yves Sukhu) Notes: Data as of market close September 30, 2022. Historical close price data from Yahoo Finance. I suppose I state the obvious by suggesting that unwarranted fear and anxiety has likely driven a good bit of the selloff in RGR shares, as with the broader market. While understandable, RGR investors who have hung on might keep in mind: 1. The end-of-summer/fall/winter months typically act as a tailwind for firearms manufacturers with hunting season kicking in and more gun owners heading back to the range. 2. While interest in firearms this year is subdued as compared to the surge seen in 2020 and 2021, National Instant Criminal Background Check (“NICS”) data hints that consumer demand for guns in 2022 remains strong. 3. Fear drove the surge in firearms sales in 2020-2021. Fear over a breakdown in the social order of the United States due to the pandemic and highly-charged political climate, among other reasons. I would argue this sense of fear remains in 2022 and may continue driving growth in gun sales. 4. Key costs, including metal and logistics costs, have been trending down. 5. Ammunition shortages in the first half of the year, in part due to the lack of availability of key production metals, may be easing and encouraging increased gun sales. While the company could still wind up laying a couple eggs, these points suggest that $0-debt RGR might yet reward investors with strong Q3 FY ‘22 and Q4 FY ‘22 results and, dare I say, a rally in shares. 5 Keys for a Strong 2H FY '22 Performance As a reminder, RGR missed both revenue and earnings estimates in Q2 FY ‘22. Figure 2: RGR Q2 FY ‘22 Earnings Versus Estimate (Seeking Alpha) Bear in mind, however, Q2 sales and earnings were both well-above pre-pandemic Q2 FY ‘19 results, a result that should be considered in the context of 1H FY ‘22 high inflation and supply chain headwinds. Figure 3: RGR Revenue and Earnings Comparison Q2 FY ‘19 vs. Q2 FY ‘22 (Yves Sukhu) Perhaps Q2 FY ‘22 estimates were a tad too aggressive with firearms manufacturers bound to return to more normal levels of demand given “...the unprecedented levels of the [firearms] surge that began in early 2020 and [remained] for most of 2021.” Either way, the five points outlined in the Introduction serve as a basis on which to think Q3 FY ‘22 and Q4 FY ‘22 results might give RGR investors something to smile about again. I list each below with further elaboration. 1. The end of summer/fall/winter months typically act as a tailwind for firearms manufacturers. I suppose a good number of readers are already familiar with the seasonality of the firearms industry. But, for those who are not, a couple industry quotes are worth mentioning here. RGR CEO Christopher Killoy noted during the firm’s Q2 FY ‘22 earnings call that “typically, we do slow down as [we] enter into [the] May, June, July time period…[but] the good news is things associated with the fall hunting season seem to be coming on strong now.” Further, Smith & Wesson Brands, Inc. (SWBI) CEO Mark Smith mentioned on their recent Q1 FY ‘23 earnings call that “we expect[ed] Q1 to have been our lowest volume quarter and expect Q2 to pick up nicely as the summer ends and consumers begin to think about heading back to the range. We expect that Q2 will grow at a faster rate than historically seen over Q1 so that it will still represent approximately 20% to 25% of our total year units shipped.” So, seasonal effects should help bolster sales and, hence, earnings as RGR closes out its fiscal year. That being said, the average revenue estimate of $141.9M for Q3 FY ‘22 is almost 50% higher than the actual $95.0M in sales recorded in Q3 FY ‘19 pre-pandemic. The figure is roughly in line with “during-the-start-of-the-surge” revenues of $145.7M in Q3 FY ‘20 and about (20%) lower than Q3 FY ‘21 sales of $178.2M. Figure 4: RGR Q3 FY ‘22 Earnings Estimate (Seeking Alpha) In spite of having the favor of seasonality, is the Q3 FY ‘22 revenue estimate too aggressive? Perhaps not given the following 4 points. 2. Consumer demand for guns in 2022 remains reasonably strong. Figure 5 below details NICS background check statistics through August 31, 2022. Figure 5: NICS Firearm Background Checks (Federal Bureau of Investigation) While monthly figures for 2022 are below the analogous statistics for 2021 and 2020, the number of background checks this year, so far, is actually tracking above pre-pandemic levels. In fact, the total number of background checks this year through the end of August is about 2,000,000 more than through the same period in 2019. Now, NICS data does not correlate directly with firearm sales. Moreover, National Shooting Sports Foundation (“NSSF”) adjusted NICS data, which subtracts permit rechecks, actually decreased 17% in 1H 2022 versus 1H 2021, as noted by Mr. Killoy during RGR’s most recent earnings call. Accordingly, one must be cautious extrapolating from the raw NICS data above. Still, with the industry expected to benefit from typical seasonal effects and reasonably strong NICS data through the end of August, perhaps demand is shaping up nicely to support good Q3 FY ‘22 and Q4 FY ‘22 performances. It is also interesting to consider that new demographic groups may be driving NICS data and hence gun sales in the United States. CNN ran an article a few days ago with a title that says it all: "Liberal, female and minority: America’s new gun owners aren’t who you’d think." While the article does not offer any particular statistics insofar as how big these “new” gun-owning demographic groups are, nor how fast they are growing. But it should nonetheless pique the interest of investors that the consumer base that the firearms industry can market to may be expanding. 3. Fear remains in 2022. A couple quotes stuck with me as I read the CNN article mentioned in the previous point: Our society and climate is changing… it’s just better to be prepared for your own safety and protection. That’s how we feel. I’m a Mexican woman in a same-sex relationship; I need to feel safe. I need to feel protected, Mendez said. And right now the laws and the things that are going on don’t make me feel safe and don’t make me feel protected. These are obviously two isolated examples, but they suggest a certain portion of the populace in the United States remains concerned about the state of the country for whatever reason. I certainly would prefer to live in a society without fear as opposed to one dominated by it. But, things being as they are, it seems that the current “climate” within the United States is driving more people toward gun ownership as opposed to the opposite. 4. Key costs, including aluminum, stainless steel, and carbon steel, have been trending down since the beginning of the year.

Aug 25

Sturm, Ruger & Company: A Trade Perspective On Toughing It Out Or Cutting Losses

Summary 2022 has not been the year to invest in firearms manufacturers, with RGR down over 20% year-to-date. RGR insiders have been selling despite the quality of the overall business. With shares now trading in the low $50s, it’s hard to say how much more they could fall. Still, I offer 2 potential dynamics that could drive better Q3 and Q4 results and help Sturm, Ruger & Company shares rally heading into the end of the year. A Quandary I find myself in a quandary with respect to my Sturm, Ruger & Company (RGR) shares. Although uncommon for my preferred investment style of staying long, I have traded small positions in RGR shares over the last couple years, buying back into the stock earlier this year when shares were trading in the mid-to-high $60s. I don't have to tell readers that this has not been (so far) a good year for firearms manufacturers. Figure 1: RGR and Selected Competitor Performance (Yves Sukhu) Figure 2: RGR Stock Price Performance (Yves Sukhu) Notes: Data in Figures 1 and 2 as of market close August 23, 2022. A Volatile FY '22 Investors in the firearms industry are, of course, subject to a great deal of volatility given the cyclic nature of gun sales in the United States. Figure 3: United States Gun Market By Volume 2011 - 2021 (Zippia) With RGR lapping a particularly strong FY '21, FY '22 sales and EPS are expected to be soft, with a similar dynamic likely playing out in FY '23 as well. The revenue estimate of $141.9M for Q3 FY '22 would represent a ~(20%) decline versus the $178.2M recorded in the prior period. Figure 4: RGR Upcoming Quarter's Earnings (Seeking Alpha) EPS is similarly expected to decrease significantly in the same period versus diluted GAAP earnings of $1.98/share in Q3 FY '21, noting also that the firm has a lousy earnings surprise history. Figure 5: RGR Earnings Surprise History (Seeking Alpha) At this point, it is difficult to imagine shares climbing back above $68/share in FY '22, the general price level at which shares closed on January, 3, 2022 to start the current fiscal year. But Still Sturm, Ruger & Company Is A Solid Business Despite the awful share performance thus far for FY '22, investors should not lose sight of the fact that RGR is an excellent business characterized by: 1. Margin strength Management explains that "... profitability declined in the second quarter of 2022 from the second quarter of 2021 as… gross margin decreased from 39% to 31%. In addition to unfavorable deleveraging of fixed costs resulting from decreased production and sales, inflationary cost increases in materials, commodities, services, energy, fuel and transportation, partially offset by increased pricing, resulted in the lower margin." Still, RGR, whose management, past and present, is arguably distinguished by a financial discipline somewhat rare among modern leadership teams, maintains a record of consistent profitability. Figure 6: RGR Margin Profile Over Last 4 Quarters Q3 FY '21 - Q2 FY '22 (Yves Sukhu) Notes: Last 4 quarters for RGR based on fiscal years ending December 31. 2. (Essentially) No debt If we ignore RGR's $2.2M of capital lease obligations, the firm presently has $0 debt, a behavior long championed by company founder Bill Ruger. 3. Legacy, brand, and excellent management RGR is one of three companies responsible for ~60% of pistol production in the United States, with brand recognition playing an important role in its market dominance. The business as it is organized today has been operating for more than 50 years and sales have been growing steadily, with net sales of $728.1M, $565.9M, and $406.3M for FY '21, FY '20, and FY '19 respectively. As already mentioned, FY '22 results are expected to soften quite a bit due to reduced market demand. Nonetheless, RGR's financial condition hints at the quality of its management team with current CEO Chris Killoy running the firm since 2017. 4. Product diversity As of Q2 FY '22, management noted that "... Ruger offers consumers almost 800 variations of more than 40 product lines." Whereas the company is naturally impacted by fluctuations in the overall gun market, their diversity across pistol, rifle, and revolver product lines provides, at least, some insulation against intra-market ebbs and flows. Then Why Are The Insiders Selling? In spite of the quality of the business, RGR insiders have been doing quite a bit of selling recently. Figure 7: RGR Insider Transactions (OpenInsider)

Shareholder Returns

RGRUS LeisureUS Market
7D1.1%-1.6%1.0%
1Y-31.6%-49.1%-20.0%

Return vs Industry: RGR exceeded the US Leisure industry which returned -51.2% over the past year.

Return vs Market: RGR underperformed the US Market which returned -23.2% over the past year.

Price Volatility

Is RGR's price volatile compared to industry and market?
RGR volatility
RGR Average Weekly Movement3.9%
Leisure Industry Average Movement8.1%
Market Average Movement6.8%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: RGR is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: RGR's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19491,912Chris Killoyhttps://www.ruger.com

Sturm, Ruger & Company, Inc., together with its subsidiaries, designs, manufactures, and sells firearms under the Ruger name and trademark in the United States. It operates through two segments, Firearms and Castings. The company provides single-shot, autoloading, bolt-action, and sporting rifles; rimfire and centerfire autoloading pistols; single-action and double-action revolvers; and firearms accessories and replacement parts, as well as manufactures lever-action rifles under the Marlin name and trademark.

Sturm, Ruger & Company, Inc. Fundamentals Summary

How do Sturm Ruger's earnings and revenue compare to its market cap?
RGR fundamental statistics
Market CapUS$905.87m
Earnings (TTM)US$124.31m
Revenue (TTM)US$653.52m

7.3x

P/E Ratio

1.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
RGR income statement (TTM)
RevenueUS$653.52m
Cost of RevenueUS$423.63m
Gross ProfitUS$229.89m
Other ExpensesUS$105.58m
EarningsUS$124.31m

Last Reported Earnings

Jul 02, 2022

Next Earnings Date

n/a

Earnings per share (EPS)7.04
Gross Margin35.18%
Net Profit Margin19.02%
Debt/Equity Ratio0%

How did RGR perform over the long term?

See historical performance and comparison

Dividends

6.8%

Current Dividend Yield

40%

Payout Ratio