The leading publicly traded U.S. firearms maker, Sturm, Ruger & Company, Inc. (RGR) reported fourth quarter 2013 earnings of $1.33 per share, in line with the Zacks Consensus Estimate. The quarterly figure improved 33% from $1.00 earned in the year-earlier quarter, driven by higher sales volume.
Full year 2013 earnings were $5.58 per share, missing the Zacks Consensus Estimate by just a penny. However, the reported figure increased 55% from $3.60 per share in 2012.
Revenue
The company booked $181.9 million of total revenue during the quarter, up more than 28% from the year-ago level of $141.8 million. The reported amount was ahead of the Zacks Consensus Estimate of $176.0 million by 3.4%.
Full year 2013 total revenue stood at $688.3 million, up almost 40% from the year-ago level. The reported number also surpassed the Zacks Consensus Estimate of $683.0 million. Firearms sales rose 39.9%, while castings sales increased 41.1% year over year.
The company attributed the sales growth mainly to new products introduced last year including the LC380 pistol, the SR45 pistol, the Ruger American Rimfire rifle, the SR-762 rifle, and the Red Label II shotgun. New product sales represented 29% of firearm sales in 2013.
Sturm, Ruger & Company’s order fell to $636.0 million in 2013 from $796.7 million in 2012. Its backlog stood at $440.6 million in 2013 versus $427.1 million in 2012.
Dividend
The company declared a quarterly dividend of 54 cents ($2.16 per share annualized), payable on Mar 28 for shareholders of record as of Mar 14.
These payouts vary each quarter as it is based on a percentage of earnings rather than a fixed amount per share. The previous quarterly dividend was 58 cents per share.
Operational Highlights
In 2013, the company’s gross profit advanced 44.5% year over year to $258.6 million. Total operating expenses were $83.7 million, up 23.3% year over year. Operating income grew 57.3% to $174.9 million during the year from $111.1 million in 2012.
Sturm, Ruger & Company’s earnings before interest, taxes, and depreciation and amortization (EBITDA) were $195.7 million in 2013, up 54.0% year over year.
Financial Performance
The company ended 2013 with cash and cash equivalents of $55.1 million versus $31.0 million in 2012.
In 2013, cash generated from operations was $120 million. The current ratio is at 1.8 to 1 with no outstanding debt.
In 2013, capital expenditure was $54.6 million, the majority of which was invested in machinery and equipment for new products, the purchase and building improvements to its Mayodan, N.C. facility, and the expansion of production capacity for products in greater demand. It expects to invest about $35 million on capital expenditures for this year mainly on new product development.
Sturm, Ruger & Company returned $41.1 million to its shareholders through the payment of dividends in 2013.
Our Take
This Connecticut-based company is the only full-line manufacturer of American-made firearms. It offers consumers more than 400 variants of over 30 product lines. Presently, it plans to increase firearm production at a 220,000-square-foot, $26 million gun plant opened in Mayodan last year. The company acquired this facility in September last year.
However, companies like Sturm, Ruger & Company, Smith & Wesson Holding Corporation (SWHC) or Black Diamond, Inc. (BDE) are apprehensive of tighter regulations for the sale of weapons in the wake of a series of unfortunate shooting incidents in the recent past. The Boston Marathon terror attack on Apr 15, 2013 and the tragic shootout at the Sandy Hook Elementary School Newtown, Connecticut on Dec 14, 2012 had sparked off fierce controversy about the proliferation of firearms.
Sturm, Ruger & Company currently retains a Zacks Rank #1 (Strong Buy). Investors may also look into Marine Products Corp. (MPX) carrying a Zacks Rank #2 (Buy).
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