The firearms industry is booming thanks to both Millennials and women… Will pro-gun Trump boost these stocks even more?
Now that Trump has the necessary number of delegates to ensure his nomination, a Trump administration looks more likely than ever. Soon, his promises to enact a national concealed carry law and do away with gun-free zones as well as gun and magazine bans could become reality.
If so, firearm, ammunition, and defense companies will see their fortunes rise. Here are six stocks to add to your portfolio in the event of a Trump victory.
Smith & Wesson Holding Corp. (NASDAQ:SWHC)
Smith & Wesson has had a very profitable year.
The company, which sells firearms under the brands Smith & Wesson, M&P, and Thompson/Center Arms, delivered a blowout third quarter earnings report in March, showing a year-over-year revenue increase of 62%. Management credited strong consumer demand for the lion’s share of that income spike.
The ramped-up demand seemed to take management by surprise. Smith & Wesson’s CEO noted on the earnings call that though the company was able to satisfy orders through internal inventories, it began the fourth quarter with less inventory than planned.
The segment for small pistols, designed specifically for the concealed-carry market, is doing particularly well. The personal protection segment continues to grow, as National Instant Criminal Background Check System permits for handguns outnumber those for long guns.
Sturm, Ruger & Co. (NYSE:RGR)
Sturm Ruger had a strong first quarter, beating analysts’ estimates on earnings and revenue. A 26% jump in income from the year ago quarter was attributed to higher demand and production capacity, as well as the introduction of new products.
Business is booming again, after a year of low demand for its products. On a recent earnings call, management said that much of its built-up inventory was sold in the fourth quarter of 2015, despite increased production. The company’s distributors saw their inventories decrease as well.
Sturm Ruger’s focus is in new product offerings. This segment encompassed 21% of its arms sales last year, and the company is plowing money back into the business to step up new product development.
The company is good to its stockholders, too. Through dividends and share buyback plans, Sturm Ruger returned $24 million to its investors, and has earmarked an additional $73 million for future capital return programs.
Vista Outdoor (NYSE:VSTO)
A spin-off of Alliant Techsystems, Vista Outdoor manufactures and sells firearms and ammunition for sport-shooting enthusiasts and hunters, as well as law enforcement and the military.
The company also sells various gun-related accessories in its Outdoor Product segment, such as riflescopes and gun care products.
Vista has come a long way since its beginnings as a standalone company just a little over a year ago. Its Shooting Sports section experienced a slowdown for part of 2015, but began to rebound by the end of the year. Its most recent earnings report showed a 26% increase in revenue from the year ago period.
Shooting Sports increased sales by 22% year over year, and management expects that surge to continue—powered by a new generation of shooting enthusiasts, many of whom are women.
Olin Corp. (NYSE:OLN)
Olin Corp. is a specialty chemical supplier that owns Winchester Ammunition. The last two years have been tough for Olin, which consistently turned in disappointing earnings results quarter after quarter.
More recently, that’s changed. Despite missing estimates on revenue in the fourth quarter, income jumped by an amazing 154%. When Olin reported first quarter earnings in February, revenue was up over 160% from the same time last year.
On the earnings call, management said it expects Winchester’s earnings to increase this year compared to last, due to cost cutting and improved commercial demand.
Consumer demand is rising, too. A presentation by Olin at the recent Goldman Sachs Leveraged Finance Conference noted market changes mentioned by Vista Outdoors—namely, that the ranks of gun enthusiasts have swelled with millions of new customers, most of whom are young, and half of whom are women.
National Presto Industries (NYSE:NPK)
This company’s business is divided into three segments: housewares and small appliances, absorbent products, and defense. The last segment manufactures and sells various tactical and training ammunition and other devices directly to the U.S. military.
Last June, the company was awarded two new contracts by the Army to develop 40MM training ammunition.
National Presto announced first quarter earnings in April, showing a drop in both sales and income from the year ago quarter. This followed a robust year-end report in which the company produced earnings per share of $5.83 for the year ending 2015 compared to a mere $3.82 for 2014.
NPK pays a generous yearly dividend of $1.00 per share and recently paid out an extra dividend of $4.05 to shareholders. For 2015, the extra dividend was $3.05. The company has paid dividends regularly for 72 years.
TASER International (NASDAQ:TASR)
A producer and seller of conducted electrical weapons, TASER also sells body cameras used by law enforcement personnel through its Axon division.
Recently, the company announced that the Service de Police de la Ville de Montreal will be trialing the Axon body cameras for nine months. This follows an announcement in January of a slew of new contracts and weapons orders.
Analysts at JPMorgan recently labeled TASR shares overweight, predicting a price of $26 per share compared to its current $22 share price.
Considering the company’s reported first quarter revenue jump of 24% from the prior year, that estimate could be a bit conservative.
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Will a pro-gun White House help gun sales?
It’s hard to say, considering that gun sales tend to spike when fears of gun control are at their highest—after a mass shooting, for example.
Still, these concerns seem overblown, since legislation at the federal level has never materialized. When it comes to laws passed by individual states, the effect has been to make gun laws less restrictive.
The trends noted by the companies above indicate a growing interest in shooting, especially among the millennial generation and women. The personal protection market cited by Smith & Wesson also seems primed to grow, regardless of the outcome of the Presidential election.
If Trump wins, his vocal support of law enforcement should boost most of these stocks, as well.
With its mix of consumer, police, and military products—and some very generous capital return programs—this group of stocks has much to offer investors, regardless of which party prevails at the polls in November.