Benchmark Defends Smith & Wesson (SWHC) and Sturm Ruger (RGR)

October 8, 2012 11:48 AM EDT Send to a Friend
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Price: $9.91 -1.78%

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    8 Buy, 3 Hold, 1 Sell

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Last week Smith & Wesson (Nasdaq: SWHC) and Sturm, Ruger & Company (NYSE: RGR) stock dropped after reports showed a slowdown in FBI background checks. Adjusted NICS, which is considered the best available monthly proxy for retail firearms sales, were up 14.7 percent in September compared to plus-20 percent growth since May.

In spite of the data, analysts at Benchmark think the sell off is overdone, and cite channel checks that continue to indicate very strong retail demand, particularly in SWHC and RGR’s key growth products.

"We note that a larger slowdown in hunting rifle sales could have driven long gun NICS down in September. Additionally, we continue to believe that a stronger than anticipated August, combined with annual two-week production maintenance shutdowns, may have resulted in lower than necessary retail inventory levels in September, limiting NICS growth," said analyst Mike Greene.

"We again remind investors that, despite being the only two publically-traded firearms manufacturers, SWHC and RGR only represent approximately 25% of total firearms sales in the United States; however, their market-leading product offerings, particularly in handguns, have driven growth that has outpaced the already strong firearms market," added Greene.


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