Smith & Wesson gains on fears of Obama gun control

By Nivedita Bhattacharjee and Supantha Mukherjee - Analysis

BANGALORE (Reuters) - Barack Obama hasn't made any noticeable moves to restrict firearms during his first two months in the White House, but America's gun owners, historically distrustful of Democratic presidents, aren't taking any chances.

Gun sales have boomed in the past four months, boosting profits at gun-maker Smith & Wesson Corp (SWHC.O), whose stock price has more than tripled from a low hit just before last November's election.

"I have been in business for years, and (gun sales are) a lot higher than at other times," said gun-shop owner Darrin Green, who owns Double Eagle Firearms Inc in Arkansas City, Kansas. Green said sales of handguns at his store have risen about 80 percent since November.

"I don't have any in stock -- I can't keep them in stock."

Eric Wold, an analyst with Merriman Curhan Ford, said the trend would translate directly into benefits for Smith & Wesson, the U.S. leader in handguns.

"The boost is really because people still don't know what the Obama administration will do," Wold said. "So instead of trying to guess, you just buy anything while you can."

Last Thursday, Smith & Wesson reported a higher-than-expected profit for the quarter ended January 31, helped by a 62 percent growth in sales of handguns and tactical rifles.

Green said he has a backlog of more than 50 orders for Smith & Wesson handguns, compared with an inventory of 200 guns in November.

Recent data from the FBI's National Instant Criminal Background Check System (NICS) show background checks for firearm sales jumped 24 percent in January and 23.3 percent in February compared with a year earlier.

NICS background checks are necessary for individuals buying firearms from federally licensed retailers, and are a strong indicator of the number of actual sales.

Some experts also think that the unsettled economic conditions make people more concerned about increased crime rates, thus boosting gun sales.

"There hasn't been any unrest, there hasn't been any increase in crime, but concerns about that potential is one reason" for the higher sales, Wold said.

HITTING THE BULLSEYE

"Smith & Wesson's product mix makes it a winner," Wedbush Morgan Securities analyst Rommel Dionisio said.

The areas that are hottest within the firearms industry, such as high-capacity rifles, are the areas where Smith & Wesson tends to have a large presence, he said.