Smith & Wesson (SWHC) Q4 Earnings Preview: Gunmaker’s Stock Nearly Erases Gains Made After Shooting In Orlando

U.S. gun stocks fell Tuesday after investors rushed to profit from the worst mass shooting in American history. Short-term traders bought stock in Smith & Wesson and its major publicly traded U.S. rival, Sturm, Ruger & Co., after a massacre at Pulse — a gay nightclub in Orlando, Florida — betting that the killings would lift shares.

They were right. Stock in both Smith & Wesson and Sturm, Ruger fell Tuesday on a small selloff from these investors while both stocks remained above Friday's closing price: Smith & Wesson up 2.1 percent and Sturm, Ruger up nearly 4 percent so far this week.

But while many short-term traders walked away with money in their pockets by buying the stocks at the start of the week, the smart money has been in gunmakers’ shares throughout the Obama presidency. The companies earn handsome profits as Americans continue to flock to gun shops and shows, arming up for what they think is an era of strict, even draconian, gun control that seems perpetually just around the corner.

If you bought and held Smith & Wesson stock on the day President Barack Obama took office, Jan. 20, 2009, you’ve made more than a 750 percent gain. If you bought Sturm, Ruger, your gains are even higher, at nearly 860 percent plus a hefty stream of dividend payments.

Those seeking more signals to whether their gun-related investments will continue to be the cash cow they’ve been for the past eight years — or whether the American public has engorged itself adequately on firearms after a yearslong bacchanal — will get a chance when Smith & Wesson Holding Corp. (NASDAQ:SWHC) reports its fourth-quarter and full fiscal 2016 financial results on Thursday after markets close in New York.

Analysts polled by Thomson Reuters expect the Springfield, Massachusetts-based company to report for the three months ending April 30 a profit of $29.7 million, or 53 cents per share, up from $21.9 million, or 40 cents per share, in the same period last year. Sales are expected to rise to $214.5 million from $181 million in the year-ago period.

The company’s fiscal fourth quarter, the spring, encompasses most industry events of the year and tends to be the strongest. Early last month, Sturm, Ruger firmly beat earnings estimates at $1.21 per share, above Wall Street’s forecast of 96 cents.

But last month, data from the FBI showed a 13 percent month-over-month plunge in criminal background checks, a proxy measure of new-gun sales, from 2.1 million to 1.9 million. The figures pushed share prices down on concern that a long surge in demand may be peaking. U.S. new-guns sales in December were among the highest in nearly 20 years, at 1.5 million units, according to the New York Times.

Firearm sales have surged in the Obama years on fears that a string of mass shootings under a Democratic president would lead to efforts to restrict gun sales. Monthly gun sales hit an all-time high of 2 million in January 2013 following Obama’s re-election and the December 2012 massacre in Newtown, Connecticut, which elevated calls for a ban on assault-style semiautomatic rifles like the AR-15 and its derivatives like Smith & Wesson's M&P15 — which has been used in some of the bloodiest mass shootings in recent history.