Sturm, Ruger & Company RGR is scheduled to release its first-quarter 2015 financial results on May 4, 2015, after the closing bell.
Last quarter, the company delivered a positive earnings surprise of 26.19%. However, the four-quarter trailing average surprise is a negative 11.58%. Let’s see how things are shaping up for this announcement.
Earnings Whispers?
Our proven model shows that Sturm, Ruger is unlikely 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 surpass earnings estimates. However, that is not the case here.
Zacks ESP: Sturm, Ruger has a negative Earnings ESP. That is because the Earnings ESP, which represents the difference between the Most Accurate estimate of 61 cents per share and the Zacks Consensus Estimate of 64 cents, is -4.69%.
Zacks Rank: Sturm, Ruger has a Zacks Rank #1, 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.
The combination of Sturm, Ruger’s Zacks Rank #1 and ESP of -4.69% deters us from coming to any firm conclusion.
Factors at Play
Sturm, Ruger is a major manufacturer of rugged, reliable firearms for the commercial sporting market. This Connecticut-based company is the only full-line manufacturer of American-made firearms with more than 400 variations of over 30 product lines.
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. Sturm, Ruger experienced persistently weak demand for its products, as was evident from the 20.9% year-over-year decline in sales in 2014.
It is worth mentioning that the FBI's National Instant Criminal Background Check System (“NICS”) showed a 9.1% decline in permit applications in calendar Q1 compared with the year-ago 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.
Peer Release
Louisiana-based Pool Corp.’s POOL first-quarter 2015 earnings of 19 cents per share beat the Zacks Consensus Estimate of 14 cents. Earnings also increased substantially from the prior-year quarter’s 9 cents.
Upcoming Release
Malibu Boats, Inc. MBUU is expected to report its third-quarter fiscal 2015 (ending Mar 31, 2014) results on Mar 5, 2015.
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