Shares of Smith & Wesson soar on rush for gun buys
Shares in firearms stocks are shooting up for a second day, driven higher by new restrictions announced by President Obama that are expected to spur -- not deter -- gun sales.
Shares of Smith & Wesson Holding Corp. (SWHC), the world's largest arms-maker, surged 12 percent Tuesday ahead of Obama's announcement of new executive actions to help curb gun violence.
The rise in Smith & Wesson shares followed a nearly 6 percent gain on Monday, following news last Thursday of President Obama's plan to announce executive actions to tighten U.S. gun control laws.
Among the proposals expected Tuesday is a new requirement for individuals in the business of selling firearms to register as licensed gun dealers. The aim is to narrow the so-called "gun show loophole," which exempts most small sellers from keeping formal sales records.
Sales of firearms in the U.S. are at an all-time high in the wake of numerous mass shootings in recent years, including massacres in San Bernardino, California; Roseburg, Oregon; and Charleston, South Carolina, which resulted in 32 deaths and 30 wounded.
On Monday, Smith & Wesson reported a better-than-expected quarter for December as a renewed gun debate in the U.S. drove a surge in sales, The Wall Street Journal reported. The company is seeing a strong start to sales in the new year.
The Springfield, Massachusetts, gun-maker now expects sales for the quarter ending Jan. 31 to rise to $175 million to $180 million, with adjusted earnings of 39 cents to 41 cents a share. That's up from a previous forecast of $150 million to $155 million, with adjusted earnings of 27 cents to 29 cents a share.
In announcing its quarterly results, Smith & Wesson said in a statement that "the sell-through rate of its products at distribution has been stronger than originally anticipated, resulting in reduced distributor inventories of its firearms."
In other words, as Business Insider noted, consumers are buying guns faster than merchants can restock store shelves.
Sales are being fueled in part by speculation among gun enthusiasts that increased regulation out of Washington will reduce their ability to buy guns, though Congress shows little appetite for crafting legislation to restrict sales. But the talk of tighter gun control nonetheless has the effect of promoting gun sales.
"As the firearms industry has seen numerous times before, the threat of gun control legislation again appears to be driving near-term retail sales acceleration, as consumers rush to dealers to purchase firearms they believe may one day become unavailable," Rommel Dionisio, an analyst at Wunderlich Securities told MarketWatch.
The heated partisan debate over gun control in the U.S. contributed to Smith & Wesson's stellar stock performance last year, Fortune reported. By mid-December the company's share price had surged more than 151 percent.