Smith & Wesson Earnings, Orlando Shooting Push Gun Stocks Higher

Inside The National Rifle Association Annual Meeting
AR-15 rifles are displayed on the exhibit floor during the National Rifle Association (NRA) annual meeting in Louisville, Kentucky, U.S., on Friday, May 20, 2016. The nation's largest gun lobby, the NRA has been a political force in elections since at least 1994, turning out its supporters for candidates who back expanding access to guns. Photographer: Luke Sharrett/Bloomberg via Getty Images
Luke Sharrett — Bloomberg via Getty Images

Shares of firearm makers surged on Thursday after a strong quarterly report from Smith & Wesson Holding Corp, adding to gains this week after a shooting at a gay nightclub in Florida in which 49 people were killed.

In a stock market reaction that has become familiar after mass shootings, shares of Smith & Wesson and rival Sturm Ruger & Co spiked as much as 11 percent on Monday.

High profile shootings such as the one in Orlando, Florida amplify fears of crime, leading some people to buy guns. Others buy them in case U.S. gun control laws become stricter. Both spur more sales for gun makers and strengthen their investment appeal.

On Thursday after the bell, Smith & Wesson reported fourth-quarter results above Wall Street’s expectations. The company gave a revenue forecast for fiscal 2017 that also impressed investors.

Smith & Wesson’s shares rose 7 percent higher in extended trade and Sturm Ruger’s rose 4 percent.

Shares of Smith & Wesson have surged over 40 percent in the past year, partly because of mass shootings including one in December in San Bernardino, California, that increased calls for gun control.

The U.S. Senate inched closer to scheduling votes on limited gun control measures on Thursday, with Democrats challenging Republicans to defy the national gun lobby and vote for new restrictions.

Sturm Ruger said in February it expects a rise in demand for its firearms if a Democrat wins the presidential election on Nov. 8 and becomes positioned to appoint future Supreme Court justices.

Smith & Wesson’s revenue forecast did not reflect any potential surge in demand caused by consumers worried about increased gun control, Chief Financial Officer Jeff Buchanan said on a conference call.

“We plan our business outlook and set our growth parameters based on our strategic direction, exclusive of any political or election-cycle influences that reside outside of our control,” Buchanan said.

Even as legislators and presidential hopefuls discuss gun control measures, investors worry that a year-long surge in firearm sales is losing steam.

FBI background checks, which give an indication of the state of U.S. gun sales, rose 1.1 percent in May from the prior year, according to adjusted data from the National Shooting Sports Foundation.

That data suggested it is becoming difficult for gun sellers to top last year’s strong sales growth.

Smith & Wesson estimated its revenue would increase around 4 percent in fiscal 2017, compared to 31 percent growth in the previous year.

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