Gun maker shares fall as firearm demand wanes

NEW YORK - Shares of the nation's major firearms makers fell Monday on analyst concerns that the postelection surge in hand gun sales may be coming to an end.

Both Sturm Ruger & Co. Inc. and Smith & Wesson Holding Corp. declined following an article in the business publication Barron's, which suggested that the companies could see slowing consumer demand for their firearms.

The news dragged stocks lower, but it wasn't completely unexpected, said Cai von Rumohr, an analyst with Cowen and Co.

"This has been the concern ever since the gun sales started to pick up," he said in an interview.

Sales began to rise following the November election of President Barack Obama on fears that a Democratic candidate would impose stricter gun control laws.

Shares of Smith & Wesson, based in Springfield, Mass., fell 27 cents, or 4.48 percent, to $5.76 in afternoon trading.

Southport, Conn.-based Sturm Ruger shares traded down $1.10 cents, or 8.63 percent, to $11.64.

Elsewhere, the broader markets were all down over investors worries due to lowered expectations for the global economy.

Despite the expected slowdown in handgun demand, von Rumohr said Smith & Wesson's prospects look promising.

He boosted his rating to "Outperform" from "Neutral," citing the company's strong cash flow, small inventory supply and its recent acquisition of security barrier manufacturer Universal Safety Response Inc., which should turn "nicely profitable" in the coming quarters, he said. Universal Safety's products include protective barriers that can stop oncoming vehicles from hitting buildings or other objects.

Smith & Wesson will release its fourth-quarter and year-end results after the market closes Monday. It reported Friday its revenue during the quarter rose 20 percent to $99.5 million. On average, analysts expect the company to earn 12 per share, according to Thomson Reuters.

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