Obama Victory a Win-Win for Gun Makers - (RGR) (SWHC)

November 7, 2012 9:19 AM EST Send to a Friend
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Price: $10.36 +0.58%

Rating Summary:
    8 Buy, 3 Hold, 1 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 24 | Down: 14 | New: 40
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Benchmark reiterated their Buy ratings on gun makers Smith & Wesson Holding (NASDAQ: SWHC) ($13 PT) and Sturm, Ruger (NYSE: RGR) ($60 PT) following an Obama victory saying it may drive further "political" firearm sales. They also expect long-term organic growth to continue.

"With President Obama winning a second term in office after last night's election, "political" buying or the "Obama surge" could continue well into 2013," analyst Mike Greene notes. "Sales of commercial firearms have grown significantly over the past several years, and some have attributed the majority of these sales to a fear that Mr. Obama would enact more restrictive firearm legislation during his time in office. While we maintain our view that these political sales do not represent the entirety of recent firearms sales growth, we expect that with President Obama's reelection these sales could continue well into his second term. Furthermore, while Mr. Obama has recently reiterated his view that he would support a reinstitution of the 1994 Federal Assault Weapons Ban, we do not believe there would be support in Congress for more restrictive firearms legislation. Essentially, last night’s outcome is a near-term "win-win" for firearms sales, in our view."

The analyst also notes that sales growth began well before the "Obama surge" and will continue after it, in our view.

"Despite all the focus on potential political sales growth during Obama's first term, we note that industry-wide double-digit sales growth began in 2006, with double-digit handgun growth beginning in 2005. Furthermore, we believe that the past decade represented an inflection point of: (1) strong new product innovation in the industry for the first time since the 1980s, (2) increasingly liberalized concealed-carry laws throughout most of the United States, and (3) increased social acceptance of firearm use for both personal defense and recreation/leisure."

For an analyst ratings summary and ratings history on Smith & Wesson Holding click here. For more ratings news on Smith & Wesson Holding click here.

Shares of Smith & Wesson Holding closed at $9.46 yesterday.


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