Smith & Wesson leads stock declines amid gun-control speculation

December 17, 2012

Smith & Wesson led a decline in stocks of firearms makers amid speculation that President Obama will renew a ban on assault weapons following last week’s elementary school shooting that left 20 children dead.

Smith & Wesson dropped 5.2 percent to close Monday at $8.65, extending its slide to 9.3 percent over two days after Friday’s massacre. Sturm Ruger has fallen 7.8 percent during the period, while Cabela’s, an outdoor-gear retailer that sells guns and ammunition, slumped 7.3 percent.

“Every time one of these tragic events occurs, there’s certainly a flurry of discussion over whether or not the government may tighten gun-control legislation,” said Rommel Dionisio, a Wedbush Securities analyst. Last week’s slayings may be viewed differently because of “the use of what can be considered an assault rifle and certainly the number of children, and the fact that it was very young children.”

Obama “intends to get the ball rolling,” said Dionisio, who is based in New York and rates Smith & Wesson stock neutral.

Smith & Wesson, based in Springfield, Mass., relied on sales of firearms for 96 percent of its revenue in fiscal 2012, according to data compiled by Bloomberg. The stock has almost doubled this year, while Southport, Conn.-based Sturm Ruger has gained 31.5 percent to close Monday at $44. Both make handguns as well as rifles that include semi-automatic models.

Cabela’s dropped 6.2 percent to $41.21 Monday. That pared the year-to-date gain for the Sidney, Neb.-based retailer to 62 percent.

Representatives from the three companies and the National Shooting Sports Foundation, a firearms industry trade group, didn’t immediately return phone messages seeking comment.

During the Oct. 16 presidential debate, Obama broached the idea of renewing a ban on assault weapons that lapsed in 2004, 10 years after it was championed by President Bill Clinton.

The ban included 19 semi-automatic military-style weapons and also outlawed the manufacture and sale of magazines that can feed more than 10 rounds at a time.

A similar ban would have a “noticeable impact” on companies such as Smith & Wesson and Sturm Ruger, Dionisio said.

“Up until the actual date that the law took effect, people would be flooding into stores to purchase a certain type of firearm,” he said. “But then of course, it would be banned.”

Scott Olson

Getty Images

A customer shops for a pistol at Freddie Bear Sports sporting goods store on December 17, 2012 in Tinley Park, Illinois. Americans purchased a record number of guns in 2012 and gun makers have reported a record high in demand.

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