Analyst Warns Record Guns Sales 'Unsustainable' (SWHC) (RGR) (CAB)

FBI background checks in December totaled 2.78 million, a record high that surpasses November's 2.01 million checks. The surge follows a school massacre in Connecticut that stoked calls for increased gun control. Shares of gun makers Smith & Wesson Holding Corporation (Nasdaq: SWHC) and Sturm, Ruger & Co. Inc. (NYSE: RGR) came under pressure in the wake of the shooting. However, for now guns appear to be in high demand, as check are typically a good proxy for gun sales. However, analysts warn that the surge in sales may be short lived.

"Overall, we believe the December data is in line with expectations, as recent events and the pending introduction of gun control legislation appear to have driven much of the significant increase in activity,”" said analyst Scott W. Hamann of Keybanc. "While demand continues to appear solid, we believe large spikes in sales remain driven by headline events, underscoring our thesis that the current level of demand is potentially unsustainable at current levels,"

Keybanc has an Underweight rating on Sturm, Ruger & Co. Inc. (NYSE: RGR) and Hold ratings on Smith & Wesson Holding Corporation (Nasdaq: SWHC) and Cabela's Incorporated (NYSE: CAB).

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