Sturm, Ruger & Company RGR is scheduled to release its third-quarter 2015 financial results after the closing bell on Nov 4, 2015.
Last quarter, the company had delivered a positive earnings surprise of 8.33%. However, the four-quarter trailing average surprise is a negative 2.21%. Let’s see how things are shaping up for this announcement.
Factors at Play
Firearm companies like Sturm, Ruger & Company and Smith & Wesson Holding Corporation SWHC have been hit by low demand for weapons, as the earlier rush to possess firearms triggered by the fear of tighter regulations has ebbed to a large extent.
The FBI's National Instant Criminal Background Check System (“NICS”) showed a 6.6% uptick in permit applications in the calendar third quarter compared with the previous quarter. Though one cannot draw a one-to-one co-relation between the NICS report and the number of firearms sold, any upward or downward movement of firearm background checks is likely to have a similar impact on firearm sales.
Earnings Whispers?
Our proven model does not conclusively show that Sturm, Ruger is likely to beat earnings as it lacks the required combination of two key ingredients. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to surpass earnings estimates. However, that is not the case here.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are at 70 cents.
Zacks Rank: Sturm, Ruger has a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Peer Release
Louisiana-based Pool Corp.’s POOL third-quarter 2015 earnings of 90 cents per share beat the Zacks Consensus Estimate of 86 cents by 4.7%.
Upcoming Release
Unlike Sturm, Ruger we see a likely earnings beat coming from this industry peer.
Marine Products Corp. MPX has an earnings ESP of +12.5% and a Zacks Rank #2.
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